- V - 2 V 7 X. U~. $1 . , i . . ~~~~~~. MW~U 25225 Volume 2 Volume 2 Financial Statement and Appendixes The World Bank Annual Report 2001 Volume 2 Financial Statements and Appendixes The World Bank Washington, D.C. Note The World Bank's Volume 1, Year in Review is published as a separate volume. Both volumes are available on the Internet at www.worldbank.org/annualreport. Copyright C 2001 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N.W Washington, D.C. 20433, USA All rights reserved Manufactured in the United States of America ISSN 0252-2942 ISBN 0-8213-4972-4 Contents Letter of Transmittal v Management's Discussion and Analysis 1 International Bank for Reconstruction and Development Financial Statements 33 Special Purpose Financial Statements of the International Development Association 75 IBRD/IDA Appendixes 105 Letter of Transmittal This Annual Report, which covers the period from July 1, 2000, to June 30, 2001, has been prepared by the Executive Directors of both the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) in accordance with the respective bylaws of the two institutions. James D. Wolfensohn, President of the IBRD and IDA, and Chairman of the Board of Executive Directors, has submitted this Report, together with the accompanying administrative budgets and audited financial statements, to the Board of Governors Annual Reports for the International Finance Corporation, the Multilateral Investment Guarantee Agency, and the International Centre for Settlement of Investment Disputes are published separately. Executive Directors Alternates Abdul Aziz Mohd Yaacob Nguyen Doan Hung Girmai Abraham Richard H. Kaijuka Khalid M. Al-Saad Mohamed Kamel Amr Yahya Abdulla M Alyahya Abdulrahman M Almofadhi Andrei Bugrov Eugene Miagkov Yuzo Harada Masanorl Yoshida Neil F Hyden Lewis D. Holden Finn Jonck Anna M. Brandt Matthias Meyer Jerzy Hylewski Jean-Claude Milleron Emmanuel Moulin Terrie O'Leary Sharon Weber Franco Passacantando Helena Cordeiro Philippe M Peeters Emin Dedeoglu Stephen Pickford Rosemary B Stevenson Jan Plercy (vacant) Moises Pineda Jose H. Machillanda Jaime Ruiz Luis Antonio Balduino Ahmed Sadoudi Inaamul Haque Helmut Schaffer Eckhardt Biskup Balmiki Prasad Singh Mahbub Kabir Mario Soto-Platero Roberto Garcia-Lopez Pieter Stek Tamara Solyanyk Bassary Toure Paulo F. Gomes Zhu Guangyao Chen Huan As of June 30, 2001 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2001 Section 1: Overview 3 Section 2: Basis of Reporting 3 Section 3: Development Activities 7 Loans 7 Derivative Products 13 Guarantees 1 4 Other Activities 15 Section 4: Liquidity Management 15 Section 5: Funding Resources 17 Equity 1 7 Borrowings 1 9 Section 6: Financial Risk Management 20 Credit Risk 20 Market Risk 23 Operating Risk 2 7 Section 7: Results of Operations 28 Glossary of Terms 31 Throughout Management's Discussion and Analysis, terms in boldface type are defined in the Glossary of Terms on page 31 The Management Discussion and Analysis contains forward looking statements which may be identified by such terms as "anticipates", "believes", "expects", "intends" or words of similar meaning. Such statements involve a number of assumptions and estimates that are based on cur- rent expectations, which are subject to risks and uncertainties beyond IBRD's control. Conse- quently, actual future results could differ materially from those currently anticipated. 2 THE WORLD BANK ANNUAL REPORT 2001 1. OVERVIEW The International Bank for Reconstruction and Devel- augment reserves, waivers of loan charges to benefit opment (IBRD) is an international organization estab- eligible borrowers, and grants from net income to sup- lished in 1945 and is owned by its member countries port developmental activities IBRD's main goals are promoting sustainable eco- FY 2001 net income was $1,489 million, $502 million nomic development and reducing poverty It pursues lower than the precedin year This reduction in net these goals primarily by providing loans, guarantees lom e resodingly reducytn on and related technical assistance for projects and pro- micome coraet respondin reduced IBRD's return on grams in its developing member countries IBRD's e anne re tur on average eaninmg assets The ability to intermediate funds from international capital major reason for the dechlne sn net income was an markets for lending to its developing member coun- inacrsei the loan loss provision expense as a result tries is an important element in achieving its develop- of nonaccrual events, and deterloration in the quality met oasIBD' bjctvei nt omaimz of the accrual loan portfolio This Increase in expense ment oalsIBRDs obectiv is ot t maxmizewas partially offset by income of $345 million recog- profit, but to earn adequate net income to ensure its was as y offsety mcome of $345cil g Accog- financial strength and to sustain its development activ- n as a result of the adoption of Fancial Account- ities Box I presents selected financial data for the last ing Standard No 133 and International Accountig five fiscal years The financial strength of IBRD is based on the support On August 2, 2001, the Executive Directors approved it receives from its shareholders and on its array of the allocation of $618 million of FY 2001 net income financial policies and practices. Shareholder support to general reserves, and recommended to IBRD's for IBRD.is reflected in the capita l .backing it hs Board of Governors the transfers of $371 million from for IBRD Is reflected in the capital backing It has received from its members and in the record of its bor- unallocated net income and $31 million from Surplus rowing members In meeting their debt-service obliga- to other development purposes For FY 2002, a rowingmemb rs in meigtir detsric bia decrease from 1 5 basis points to 5 basis points in the tions to it IBRD's financial policies and practices have led it to build reserves, to diversify its funding sources, interest waiver was approved for old loans For new to hold a large portfolio of liquid investments, and to loans, the interest waiver of 25 basis points was main- limit a variety of risks, including credit, market and tained FY 2002 waivers of 50 basis points on commit- liquidity risks ment charges were also maintained at the FY 2001 level IBRD's principal assets are its loans to member coun- tries The majority of IBRD's outstanding loans are 2. BASIS OF REPORTING priced on a cost pass-through basis, in which the cost Financial Statement Reporting of funding the loans, plus a lending spread, is passed through to the borrower IBRD prepares its financial statements in accordance with generally accepted accounting principles To raise funds, IBRD issues debt securiies in a varety (GAAP) in the United States of America and Intema- of currencies to both institutional and retail investors tional Accounting Standards (together referred to in These borrowings, together with IBRD's equity, are this document as the 'reported basis') Effective July used to fund its lending and mvestment activities, as 1, 2000, IBRD adopted Statement of Financial well as general operations Accounting Standard (FAS) No 133, "Accounting for IBRD holds its assets and liabilities primanly in U S Derivative Instruments and Hedging Activities", along dolars euo (nd ts atina cureny uits, ad Jp- with its related amendments Concurrently, IBRD also dollars, euro (and its national currency units), and Jap- early adopted International Accounting Standard No anese yen IBRD mitigates its exposure to exchange 39, ancial Intrnts Recogntin andare- rate risks by matching the currencies of its liabilities ment"F These standards are cRoletognlton and Measur and equity with those of its assets However, the 133" for purposes of this document reported levels of its assets, liabilities, income and expense in the financial statements are affected by FAS 133 requires that all derivatives be recorded on exchange rate movements of major currencies com- the balance sheet and reported at fair value IBRD has pared to IBRD's reporting currency, the U S dollar marked all derivative instruments, as defined by FAS The fluctuations captured in the cumulative transla- 133, to fair value, with changes in the fair value being tion adjustment for purposes of financial statement recognized immediately in earnings reporting do not impact IBRD's risk-bearing capacity Although these standards allow hedge accounting for Lending comrnitments in FY 2001 stabilized at $10.5 certain qualifying hedging relationships, when these billion, slightly below the FY 2000 level of $10 9 bil- criteria are applied to IBRD's financial instrument lion, after a period of high demand for adjustment portfolios, certain of the hedged instruments would be loans in FY 1999 and 1998 carned at fair value, while other similar hedged instru- In the context of assessing changes in IBRD's operat- ments would be carried at amortized cost Upon adop- ing environment, it is management's practice to rec- tion of the new standards, IBRD elected not to defie ommend each year the allocation of net income to any qualifying hedging relationships While IBRD IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2001 3 beheves that its hedging strategies achieve its objec- Loan Portfolio tives, the application of FAS 133 qualifying hedge cri- teria would not make fully evident the nsk All of IBRD's loans are made to or guaranteed by management strategy that IBRD employs countries that are members of IBRD. IBRD does not currently sell its loans, nor does management believe Management Reporting there is a market for loans comparable to those made by IBRD The current value amount of loans incorpo- For management reporting purposes, IBRD prepares rates management's best estimate of the probable current value financial statements expected cash flows of these instruments to IBRD. IBRD manages its balance sheet by making extensive The current value of all loans is based on a discounted use of derivatives to manage the interest rate and cur- cash flow method. The estimated cash flows from rency risks associated with its financial assets and ha- principal repayments and interest are discounted by bilities. IBRD uses derivative instruments for asset/ the applicable market yield curves for IBRD's funding liability management of individual positions and port- cost, plus IBRD's lending spread, adjusted for interest folios, and to reduce borrowing costs waivers The current value also includes IBRD's assessment of IBKD 's funding operations are designed to meet a the appropriate credit risk, considering Its history of major organizational objective of providing lower cost the recedit rom onsiders. Its historyays funds to borrowing members. Because of the exteint of payment receipts from borrowers. IBRD has always funds to orowg emer. ecus o te xtntof eventually collected all contractual principal and IBRD's long-dated funding, the reported volatility mterest due on its loans However, IBRD has suffered under FAS 133 may be more acute than for many losses resulting from the difference between the dis- other financial institutions. FAS 133 adjustments may counted present value of payments for interest and significantly affect reported results in each accounting charges according to the loan's contractual terms, and period, depending on changes in market rates. How- the actual timing of cash flows To recognize the risk ever, IBRD believes that its funding and asset/liability inherent in these and any other potential overdue pay- management strategies accomplish its objectives of ments IBRD adjusts the value of its loans through its protection from market risk and provision of lower ment, lBs adjusio th cost funding, and that a current value basis provides loan loss provision. more meaningful information for risk management For purposes of the current value presentation, the and management reporting $676 million adjustment, reflectmg the mark from the credit assessment on the loan porfolio, is presented as IBRD believes that a current value presentation better part of the adjustment relating to current value on the reflects the economic value of all of its financial income statement. instruments The basis for the current value model is the present value of expected cash flows based on an Investment Portfolio appropriate discount rate and incorporating market Under both the reported and current value basis, the data The current value financial statements do not purrta the cureent vue ineeaniable, st atee nts dor nt investment securities and related financial instruments purport to present the net realizable, liquidation, or held in IBRD's trading portfolio are carried and market value of IBRD as a whole reported at market value or at their estimated fair val- Current Value Basis ues. Market value is based on market quotations, instruments for which market quotations are not The Condensed Current Value Balance Sheets in readily available have been valued usmg market-based Table 1 present IBRD's estimates of the economic methodologies and market information value of its financial assets and liabilities, after consid- ering interest rate, currency and credit risks. These The adjustment to current value of $51 million moves balnc sheest are preented withia re ilit Toe the mark-to-market unrealized gains recongized in .athe reported accounts at Jun re 30 2001. Operating Income under the reported basis and the reprteacoutsatune30201includes them as part of the adjustment relating to IBRD's Condensed Current Value Comprehensive current value on the income statement Statement of Income, with a reconciliation to the Borrowings reported basis, is presented in Table 2. A summary of the effects on net income of the current The current value of borrowings includes the value of value adjustments in the balance sheet is presented in the debt secunties and the financial derivative instru- Table 13 ments associated with the borrowings portfolio. The current value is calculated based on market data using market-based methodologies 4 THE WORLD BANK ANNuAL REPORT 2001 Box 1: Selected Financial Data As of or for the Year Ended June 30 In millions, except ratio and return data in percents Current Value Basis 2001 Net Income 1,460 Net Return on Average Earning Assets 0.89 Return on Equity 4.98 Equity-to-Loans Ratio 21.34 Cash and Liquid Investmentsa 24,407 Loans Outstanding 123,062 Borrowings Outstandingb 110,290 Total Equity 29,744 Reported Basis 2001 2000 1999 1998 1997 Loan Income 8,143 8,153 7,649 6,881 7,235 Provision for Loan Losses (676) 166 (246) (251) (63) Investment Income 1,540 1,589 1,684 1,233 834 Borrowing Expenses (7,152) (7,128) (6,846) (6,144) (5,952) Net Noninterest Expense (711) (789) (723) (476) (769) FAS 133 Adjustments 345 Net Income 1,489 1,991 1,518 1,243 1,285 Net Return on Average Earning Assetsc 0 87 1 34 1 05 0 96 1 02 before the effects of FAS 133d 0.78 Gross Return on Average Earning Assetsc 6.61 6.53 6.47 6 29 6 41 Average Outstanding Loansc 6 67 6 71 6 58 6 43 6 62 Average Cash and Investments 6.28 5.74 6.00 5 63 5 02 Cost of Average Borrowings (after swaps) 6.12 5 92 5.92 6.01 6 06 before the effects of FAS 133d 6.18 Interest Coverage 1 18 1 28 1.22 1 20 1 22 before the effects of FAS 133d 1 16 Return on Equity 4 63 7 73 6 16 5 29 5 21 before the effects of FAS 133d 4 33 Equity-to-Loans Ratioe 21.42 21 23 20 65 21 44 22 06 Total Assets 222,841 228,539 230,445 204,808 161,786 Cash and Liquid Investmentsa, f 24,407 24,331 30,122 24,837 18,250 Loans Outstanding 118,866 120,104 117,228 106,576 105,805 Accumulated Provision for Loan Losses (3,959) (3,400) (3,560) (3,240) (3,210) Borrowings Outstandingb 106,757 110,379 115,739 103,477 96,679 Total Equity 29,570 29,289 28,021 26,514 27,228 a Excludes restricted cash b Outstanding borrowings, before swaps, net of premium/discount c Includes income from commitment charges d Amounts are presented before the effeas of FAS 133 to facilitate companson to pnor years e Before the effects of FAS 133 See Section 5, Funding Resources-Equity for additional dtscussion f Includes investments designated as held-to-maturity forfiscal years 1997-98 IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2001 5 Table 1: Condensed Current Value Balance Sheets at June 30, 2001 and June 30, 2000. In millions of US dollars June 30, 2001 June 30, 2000 Reversal of Current Current Reported FAS 133 Value Value Pro Forma Basis Effects Adjustment Basis Current Value2 Due from Banks $ 685 $ 685 $ 691 Investments 24,490 24,490 25,042 Loans Outstanding 118,866 $4,196 123,062 122,265 Less Accumulated Provision for Loan Losses and Deferred Loan Income (4,459) (4,459) (3,860) Swaps Receivable Investments 11,043 11,043 11,317 Borrowings 63,326 $(2,032) 2,032 63,326 69,410 Other Asset/Liability 728 (2) 2 728 Other Assets 8,162 (489) 7,673 7,406 Total Assets $222,841 $(2,034) $5,741 $226,548 $232,271 Borrowings $106,757 $ (45) $3,578 $110,290 $111,771 Swaps Payable Investments 10,791 10,791 11,720 Borrowings 68,051 (1,362) 1,362 68,051 73,089 Other Asset/Liability 701 - - 701 Other Liabilities 6,971 6,971 6,287 Total Liabilities 193,271 (1,407) 4,940 196,804 202,867 Paid in Capital Stock 11,476 11,476 11,418 Retained Earnings and Other Equity 18,094 (627) 801 18,268 17,986 Total Liabllities and Equity $222,841 $(2,034) $5,741 $226,548 $232,271 a. Certain reclasstficatwns have been made to conform to the current year's presentation Table 2: Condensed Current Value Comprehensive Statement of Income for the Year Ended June 30, 2001 In millions of US. dollars FY 2000 FY 2001 Adjustments Current Value to Current Comprehensive Reported Basis Reported Basis Value Basis Income from Loans $ 8,153 $ 8,143 $8,143 Income from Investments, net 1,589 1,540 $ (51) 1,489 Other Income 299 326 326 Total Income 10,041 10,009 (51) 9,958 Borrowing Expenses 7,128 7,152 7,152 Administrative Expenses 1,061 1,006 1,006 Provision for Loan Losses (166) 676 (676) Other Expenses 27 31 31 Total Expenses 8,050 8,865 (676) 8,189 Operating Income 1,991 1,144 625 1,769 Current Value Adjustments 367 367 Provision for Loan Losses-Current Value (676) (676) FAS 133 Adjustments 345 (345) _ Net Income $ 1,991 $ 1,489 $ (29) $1,460 6 THE WORLD BANK ANNUAL REPORT 2001 3. DEVELOPMENT ACTIVITIES Figure 1: Commitments by Region a IBRD offers loans, related dernvative products, and In rmlions of US dollars guarantees to its borrowing member countries to help meet their development needs It also provides techni- 6,000 cal assistance and other advisory services to support poverty reduction in these countries. 5000 4,807 Loans 3,898 From its establishment through June 30, 2001, IBRD * - had approved loans, net of cancellations, totaling 2733 $314,969 million to borrowers in 129 countries A 2,495 - summary of cumulative lending and the portfolio l l I - position is contained in Table 3 2,000 I Table 3: Lending Status at June 30, 1 L _ 1i In millions of US dollars I 2001 2000 ___________ __________ AFR EAP BCA LCR MNA OAR Cumulative Approvals' 314,969 309,839 Cumulative Repaymentsb 151,262 141,265 MFYO1 EIFYOO Outstanding 118,866 120,104 a Regional acronyms are defined in the acronym list con- Undisbursedc 37,934 44,754 tained in The World Bank Annual Report 2001 Total Loans 156,800 164,858 Volume), Year in Review Under IBRD's Articles of Agreement (the Articles), as a Net of cancellations applied, the total amount outstanding of direct loans b Multicurrency pool loan repayments are included at made by IBRD, participation in loans and callable exchange rates in effect on the date of onginal disburse- guarantees may not exceed the statutory lending limit ment Al other amounts are based on US dollar equva- At June 30, 2001, outstanding loans and callable guar- lents at the time of receipt antees (net of the accumulated loan loss provision) c Includes loans approved, but not effecive totaled $11 5,390 million, equal to 55% of the statu- The amount of loans outstanding at June 30, 2001 was tory lending limit. $1,238 million lower than that at June 30,2000 The IBRD's lending operations have conformed generally decrease is primarily attributable to negative currency to five principles derived from its Articles. These prin- translation adjustments, which exceeded the increase ciples, taken together, seek to ensure that IBRD loans in net disbursements. The undisbursed balance was are made to member countries for financially and eco- reduced by cancellations and currency translation nomically sound purposes to which those countries adjustments, along with disbursements have assigned high priority, and that funds lent are uti- During FY 2001, commitments of new loans to mem- lized as intended The five principles are described in ber countries stabilized at $10,487 million, down Box 2 Within the scope permitted by the Articles, slightly from $10,919 million in FY 2000 Commit- application of these principles must be developed and ments for FY 1999 and FY 1998 were substantially adjusted in light of experience and changing condi- higher as IBRD responded to a higher demand for tions adjustment lending. Lending Cycle As in the preceding fiscal year, Latin America The process of identifying and appraising a project and accounted for the largest share of commitments in FY approving and disbursing a loan often extends over 2001 Figure 1 presents the regional composition of several years However, on numerous occasions IBRD commitments for FY 2001 and FY2000 has shortened the preparation and approval cycle in response to emergency situations such as natural disas- ters in Turkey and Central America, as well as the financial crisis in Asia Generally, the appraisal of projects is carried out by IBRD's operational staff (economists, engineers, finan- cial analysts, and other sector and country specialists) With certain exceptions, each loan must be approved by IBRD's Executive Directors (See Box 3, Adaptable Program Loans and Learning and Innovation Loans) IBRD MANAGEMENT's DISCUSSIONANDANALYSIS JUNE30,2001 7 Box 2: Lending Operations Principles (i) IBRD makes loans to governments, governmental authorities or private enterpnses in the territories of member countries A loan that is not made directly to the member in whose territories the project is located must be guaranteed as to pnncipal, interest and other charges by the member or its central bank or a comparable agency of the member acceptable to IBRD. A guarantee by the member itself has been obtained in all such cases to date (ii) IBRD's loans are designed to promote the use of resources for productive purposes in its member countries Projects financed by IBRD loans are required to meet IBRD's standards for technical, eco- nomic, financial, institutional and environmental soundness (m) In making loans, IBRD must act prudently and pay due regard to the prospects of repayment Deci- sions to make loans are based upon, among other things, studies by IBRD of a member country's eco- nomic structure, including assessments of its resources and abihty to generate sufficient foreign exchange to meet debt-service obligations (iv) IBRD must be satisfied that in the prevaling market conditions (taking into account the member's overall external financing requirements), the borrower would be unable to obtain financing under conditions which, in the opinion of IBRD, are reasonable for the borrower IBRD is intended to pro- mote pnvate investment, not to compete with it. (v) The use of loan proceeds is supervised IBRD makes arrangements to ensure that funds loaned are used only for authorized purposes and, where relevant, with due attention to considerations of cost- effectiveness This policy is enforced primanly by requiring borrowers (a) to submit documentation establishing, to IBRD's satisfaction, that the expenditures financed with the proceeds of loans are made in conformity with the applicable lending agreements and (b) to maximize competition in the procurement of goods and services by using, wherever possible, international competitive bidding or, when it is not appropriate, other procedures that ensure maximum economy and efficiency Loan disbursements are subject to the fulfillment of Figure 2. IBRD Lending Commitments conditions set out in the loan agreement. During project implementation, IBRD staff with experience in the sector or the country involved periodically visit 100 project sites to review progress, monitor compliance - with IBRD policies and assist in resolving any prob- lems that may arise After completion, projects are evaluated by an independent IBRD unit and the find- 75 - ings reported directly to the Executive Directors to determine the extent to which the project's major objectives were met Similar appraisal, approval, supervision and evaluation procedures apply in the case of IBRD adjustment and other non-project loans. Lending Instruments 25 IBRD lending generally falls into one of two catego- Adjustment ries investment or adjustment lending Histoncally, most IBRD loans have been for investment projects or programs Figure 2 presents IBRD lending by category - I I I I I for the last seven fiscal years, as a percentage of total FY95 FY96 FY97 FY98 FY99 FYOO FYOI loans approved Current operating guidelnes state that adjustment In FY 2001, adjustment commitments accounted for lending, excluding debt and debt-service reduction 38% of total commitments (41%-FY 2000) As a loans, will normally not exceed 25% of total IBRD result of country-specific developments and adverse lending This guideline was established with the market conditions, adjustment commitments in FY understanding that it was likely to be exceeded if 1999 accounted for 63% of total commitments in that world economic conditions worsened This guideline year. The Executive Directors are aware that the is not a rigid limit, but rather a trigger for a reevalua- guideline has been exceeded in recent years, and may tion of planned lending possibly be exceeded again in subsequent years. 8 THE WORLD BANK ANNUAIL REPORT 2001 Investment Lending spread loans offer more flexible repayment terms, this IBRD has several lending instruments that support flexibility is subject to limits aimed at maintaining a investment activities, either discrete projects or pro- similar average loan maturity across all loan products grams of investment Investment lendmg committed for a given borrower for FY 2001 totaled $6,550 million ($6,493 million- For most products in its portfolio, IBRD charges a FY 2000, $8,245 million-FY 1999) Box 3 presents a lending rate composed of its average cost of borrow- description of each investment lending instrument and ings plus a spread Until July 31, 1998, that spread a breakdown of IBRD's investment lending approved was 50 basis points. However, during FY 1999 the in FY 2000 and in each of the two preceding fiscal lending spread was increased to 75 basis points for years new loans Also, a front-end fee of 100 basis points, Adjustment Lending payable for each such loan at the time it becomes IBRD also makes adjustment loans designed to sup effective, was introduced. In addition, most loans carry IBRD also makes adjustment loans designed to sup- a commitment charge of 75 basis points on undis- port the introduction of basic changes in economic bursed amounts However, the fixed-spread loans financial and other policies of key importance for the carry a commitment charge of 85 basis points for the economic development of member countries Dis- first four years and 75 basis points thereafter bursements on these loans are conditioned on certain performance objectives. Adjustment lending com- Waivers of a portion of interest owed by all eligible mitted for FY 2001 totaled $3,937 million ($4,426 borrowers are determined annually and have been in million-FY 2000, $13,937 million-FY 1999 ) Box 4 effect for each of the previous ten fiscal years Eligibil- provides a description of each adjustment lending ity for the partial waiver of interest is limited to bor- instrument and the details of IBRD's adjustment lend- rowers who have made full payments of principal and ing approved in FY 2001 and each of the two preced- charges within 30 calendar days of the due dates dur- ing fiscal years ing the preceding six months, on all their loans. Waiv- Enclave Lending ers of a portion of the commitment charge owed on the undisbursed portion of loans are also determined On rare occasions, IBRD will lend for a large, foreign annually and have been in effect for each of the last exchange generating project in a member country usu- twelve fiscal years All borrowers receive the commit- ally eligible only for loans from the International ment charge waiver on their loans (except on non- Development Association (IDA). In these circum- standard single currency loans such as Special stances appropriate risk mitigation measures are incor- Structural and Sector Adjustment Loans) Further porated (including off-shore escrow accounts and details are provided in the Notes to Financial State- debt-service reserves acceptable to IBRD) to ensure ments-Note C that the risks to IBRD are minimized At June 30, 2001, IBRD had $166 million in outstanding loans for Table 4: Loan Charge Waivers enclave projects ($170 million-June 30, 2000) No new enclave lending was approved during FY 2001 Basis points Financial Terms of Loans Interest Penod Commencing FY 2002 FY 2001 FY 2000 As of June 30, 2001, IBRD offers new loans with sin--Comitmnt ee aivrs 502000 gle currency loan terms which may carry either a vari- able or fixed spread Interest waivers' Old loans 5 15 5 In previous years, IBRD has offered loans with a vari- New loans 25 25 25 ety of other financial terms including multicurrency Average eligibility - 96% 93% pool loans and fixed-rate single currency loans Multi- currency pool loans represented the only available loan product during the period 1980 to 1993 A varn- a Oni loans to eligible borrowers able-spread single currency loan product was intro- duced in 1993 and a fixed-rate single currency loan Multicurrency Pool Loans product was introduced in 1995 In 1999, the fixed- IBRD no longer offers multicurrency pool loan terms spread single currency loan was introduced which as o March offers the substan derms gives borrowers access to a range of embedded risk as of March 1, 2001, in view of the substantial decline mgivesmwers alternatives in demand for this product and the administrative cost management alternatives of continuing to offer them Moreover, with the intro- The current product mix is intended to provide bor- duction of the fixed-spread loan, borrowers can repli- rowers with the flexibility to select terms that are both cate the main characteristics of the multicurrency pool compatible with their debt management strategy and loan and also obtain access to a range of embedded suited to their debt-servicing capability Most variable risk management tools The currency composition of spread single currency loans mature over a period that multicurrency pool loans is determined on the basis of ranges from fifteen to twenty years and carry a three- a pool, which provides a currency composition that is to five-year grace period for principal. While fixed- the same for all loans in the pool Pursuant to a policy IBRD MANAGEMENT's DISCUSSION AND ANALYSIS JUNE 30,2001 9 Box 3: Investment Lending Commitments (in millions of U.S. dollars) Specific Investment 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Emergency Recovery lf 1999 O FY2000 3 FY2001 M * Specific Investment Loans fund the creation, rehabilitation and maintenance of economic, social and institutional _~~~~~-7 T,,, I I,,I II , ,,,, in, frastructure 0 200 400 600 800 1,000 1,200 * Emergency Recovery Loans restore assets and productivity Adaptable Program immediately after a major emergency (such as war, civil disturbance, or natural disaster) that seriously disrupts a l__________________m I ember country's economy I * Adaptable Program Loans provide phased support for long __________________r____term development programs through a series of opera- tions. Succeeding operations are committed on the basis of satisfactory performance on agreed milestones, indicators, Financial Intermediary periodic reviews, and the evaluation of implementation progress and emerging needs Authority for approval of subsequent adaptable program loans under programs approved by the Executive Directors is with IBRD's man- agement, subject to oversight and review by the Executive Directors 0 200 400 600 800 * Financial Intermediary Loans provide long-term resources to local financial institutions, helping to develop sound Sector Investment and Maintenance financial sector policies and institutions, promoting the operational efficiency of those institutions, and improving the terms of credit available to enterprises and households. No loans of this type were committed during FY 2001. _ ______I __i i i i l ______i __i ___ * Sector Investment and Maintenance Loans aim to bring sec- tor expenditures, policies and performance in line with a country's development priorities Technical Assistance * Technical Assistance Loans are used to build institutional capacity in the borrowing country. They are used to build capacity in entities concerned with promoting economic and social development, as well as public sector reform _ i I * Learning and Innovation Loans support small, pilot-type 0 200 400 600 800 investment and capacity-building projects that, if success- ful, could lead to larger projects that would mamstream Learing and Innovation the learming and results of the loan. These loans do not exceed $5 million and are normally implemented over two to three years Approvals of specific individual loans are at the management level rather than at the Executive Direc- 400 . . : I 1800 tor level 1W0 200 400 600 800 10 THE WORLD BANK ANNUAL REPORT 2001 Box 4: Adjustment Lending Commitments (in millions of U.S. dollars) Structural Adjustment I I I ~0 1.000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Special Structural and Sector Adjustment FY1999 I FY2000 E3 FY2001 - I *. Structural Adjustment Loans support specific policy changes and institutional reforms These loans require agreement on a satisfactory macroeconomic framework and policy actions 0 1,200 2,400 3,600 4,800 that can be monitored on a specific schedule * Spectal Structural and Sector Adjustment Loans are fast-dis- Sector Adjustment bursing loans which provide support to countries facing a sectoral or economy-wide crisis with a substantial structural dimension These instruments were introduced in FY 1999 No loans of this type were committed during FY 2001 . Sector Adjustment Loans support comprehensive policy _I '' changes and institutional reforms in major sectors They also 0 1,200 2,400 3,600 4,800 require agreement on a satisfactory macroeconomic frame- work and its implementation, and a specific program that Programmatic Structural Adjustment can be monitored . * Programmatic Structural Adjustment Loans support govern- . mental programs of structural and social reforms that involve continuous, incremental policy changes and institution build- _______________ .sing through a series of loans These loans rely on a solid foun- _ I | i | | i | | i | | dation of completed or parallel analytic and advisory work in 0 600 1,200 1,800 2,400 related areas. The first of these instruments was approved in FY 2000 Debt Reduction * Debt Reduction Loans help eligible, highly-indebted member countries reduce commercial debt and debt service to a man- ageable level as part of a medium-term financing plan IBRD . ~ .o approv.ls 1Y 1999-2001 did not make any commitments of this type durng FY 1999- . . . ~~~~~~2001. 0 600 1,200 1,800 2,400 * Rehabilitation Loans support government policy reform pro- grams to assist the private sector where foreign exchange is Rehabilitation required for urgent rehabilitation of key infrastructure and productive facilities IBRD did not make any commitments of this type during FY 1999-2001. No approval& FY 1999-2001 0 600 1,200 1,800 2,400 IBRD MANAGEMENT'S DISCUSSIONAND ANALYSIS JUNE 30,2001 established by the Executive Directors and subject to month U.S dollar LIBOR interest rate plus a muni- their periodic review, at least 90% of the U.S dollar mum fixed spread, currently set at 400 basis points, equivalent value of the pool is in a fixed ratio of one which may vary for new loans over time depending on U S dollar to 125 Japanese yen to one euro. IBRD's overall risk-bearing capacity and market condi- tions These loans have a five-year maturity with a The lending rate on these cost pass-through loans Is three-year grace period on principal, and a front-end vanable, adjusted every six months to reflect the pre- feeonea pracen po th principal, amn paybont f r 1 1 ~~~~~~~~~fee of one percent of the principal amount payable on vious semester's average cost of outstanding borrow- effectiveness. Special structural and sector adjustment ings allocated to fund these loans, weighted by the eretvns.Sciltutraadscordjtmt inerage allocated tompfund ion te lo, wihe IB the loans are not eligible for waivers of interest or commit- average currency composition or the pool IBRt adds ment charges No new loans with these terms were Its lending spread to that average cost. approved in FY 2001. Single Currency Pool Loans Fixed-Spread Loans In FY 1997, IBRD offered borrowers the option to During the first quarter of FY 2000, IBRD introduced elect to modify their currency choice by converting the fixed-spread single currency loan, designed in multicurrency pool loans to single currency loan terms response to borrowers' desire for more flexible finan- or single currency pool terms. Those options expired cial products. Fixed-spread loans can be tailored to on July 1, 1998 Single currency pool terms are not meet the needs of individual projects and programs available for new commitments. The lending rate for- and support borrowers' debt management strategies mulation for loans with single currency pool terms is Fixed-spread loans are currently offered in U S dollars, the same as that for multicurrency pool loans Japanese yen and euro. Requests for other currencies Single Currency Loans will also be considered. Vanable-Spread Loans These fixed-spread loans carry an interest rate of IBRD currently offers variable-spread single currency LIBOR, plus a spread that is fixed at loan signing for loans in U S dollars, Japanese yen, euro, pounds ster- the life of the loan. At June 30, 2001, the fixed spread ling and Swiss francs, and will consider borrower was 55 basis points for U.S. dollar and euro denomi- requests for loans in other currencies Variable-spread nated loans and 50 basis points for Japanese yen. The loans carry a lending rate that is reset semi-annually fixed spread consists of (a) IBRD's projected funding The lending rate consists of a base rate, which is cost margin relative to U S dollar LIBOR, with a basis LIBOR for the applicable currency plus a spread The swap adjustment for non-U.S. dollar loans; (b) a mar- spread consists of (a) IBRD's weighted average cost ket risk premium of 5 basis points; and (c) IBRD's margin for funding for the preceding semester allo- standard lending spread cated to these loans relative to LIBOR; and (b) IBRD's The fixed-spread offered will be evaluated from time standard lending spread. These variable spread loans to time and may be reset when market changes war- are designed to pass IBRD's funding spread to LIBOR rant Fixed-spread loans carry IBRD's standard loan through to its borrowers This spread is set every six charges for new commitments. In addition, these loans months, in January and July. At June 30, 2001, 95.8% carry a commitment charge risk premium of 10 basis (96 1 % at June 30, 2000) of outstanding variable- points on undisbursed loan amounts for the first four spread loans were denominated in U.S dollars. years of the loan's life This premium, along with the Non-standard Loans market risk premium in the interest spread, compen- sates IBRD for funding and refinancmg risk In response to the global financial crises, IBRD approved and disbursed several large loans totaling Borrowers selecting this product may change the cur- $7,000 million on non-standard single currency loan rency or interest rate basis over the life of the loan and terms during FY 1998 and FY 1999. These loans carry have more flexibility in selecting loan repayment a six-month U S dollar LIBOR interest rate plus a terms. Effective February 1, 2000, a borrower may fixed spread ranging from 75 to 100 basis points and a choose to include the following conversion features in front-end fee None of these loans is ehgible for waiv- the loan contract. ers of interest or commitment charges * option to change the currency at market Subsequent to the disbursement of these loans, durmg rates of all or a part of the undisbursed or dis- FY 1999, IBRD introduced a new type of loan tailored bursed loan amounts (for a fee), to be part of a broad financial support package for bor- * option to fix the interest rate at market rates rowing countries These special structural and sector on all or a part of the disbursed amounts for adjustment loans also carry non-standard single cur- rate fixings for up to the full maturity of the rency loan terms As of June 30, 2001, IBRD had loan, and for amounts up to the outstanding approved a total of $5,051 million of special structural loan amount (without charge), or sector adjustment loans At June 30, 2001, $4,301 million of this amount had been disbursed, and $250 million had been cancelled. Their terms include a six- 12 THE WORLD BANK ANNUAL REPORT 2001 * option to unfix or re-fix the interest rate at consists of (a) IBRD's funding cost margin relative to market rates on all or part of disbursed loan the base rate for these loans, (b) a risk premium to amounts (for a fee); compensate IBRD for market risks it incurs in funding these loans; and (c) IBRD's standard lending spread * option to cap or collar the floating interest rate on all or a part of disbursed loan Table 5 presents a breakdown of IBRD's loan portfolio amounts, with a market premium (for a fee) by loan product For more information, see the Notes Transaction fees range from 12 5 to 25 basis points of to Financial Statements-Note C the notional transaction amount Repayment terms Derivative Products are more flexible than for prior products, subject to Along with the approval of the introduction of the certain constraints on the average repayment maturity fixed-spread loan product, IBRD also approved the and final matunty on a country basis. Within these offer of new derivative products for its borrowers to constraints, borrowers have flexibility to configure respond to their needs for access to better nsk man- grace periods and matunty profiles in a manner consis- agement tools These products assist borrowers in tent with the purpose of the loan. Repayment profiles hedging their risks on idividual loans made to them may be level repayment of principal, an annuity type by IBRD These derivative products include interest schedule, a bullet repayment or a customized sche - rate and currency swaps, and interest rate caps and ule Repayment profiles cannot be changed after a collars On a case-by-case basis, commodity-linked loan is signed swaps may also be considered Fixed-rate Loans Each request from a borrower for execution of a dernv- As of December 1, 1999, fixed-rate single currency ative product must include an explanation of its suit- loans were no longer available for new commitments, ability for risk management purposes IBRD will pass because the introduction of the fixed spread loan, through the market cost of the instrument to the bor- with rate fixing options, provided borrowers with sim- rower, and will charge a transaction fee comparable to ilar, but more flexible methods of fixing the interest the fee charged on the fixed-spread loan conversion rate on their loans Fixed-rate single currency loans features (and 37 5 basis points for commodity swaps) carry lending rates that are set on specified semi- These instruments may be executed either under a annual rate fixing dates for amounts disbursed during master derivatives agreement which substantially con- the preceding six months The lendmg rate consists of forms to industry standards, or in individually negoti- a base rate, which reflects market interest rates for the ated transactions IBRD is in the process of making applicable currency on the rate-fixing date for the these instruments available equivalent loan maturity, plus a spread The spread IBRDMANAGEMENT'SDISCUSSIONANDANALYSIS JUNE30,2001 13 Table 5: Portfolio by Loan Product In mtlWons of US dollars FY2001 FY2000 FY 1999 Pnncipal Asa % of Pnncipal Asa % of Pnncipal Asa %of Loan Product Balance Total Loans Balance Total Loans Balance Total Loans Variable-Rate Multicurrency Pool Loans Outstandmg $30,258 25 $35,542 30 $ 37,203 32 Undisbursed 3,177 8 4,567 10 6,344 12 Single Currency Pool Loans Outstanding 30,521 26 35,422 29 40,693 35 Undisbursed 125 * 241 1 374 Variable-Spread Single Currency Loans' Outstanding 38,484 32 33,078 28 25,462 22 Undisbursed 25,590 67 29,486 66 33,862 66 Fixed-Rate Sinmle Currency Loans Outstanding 15,420 13 13,636 11 11,238 9 Undisbursed 4,844 13 8,273 18 10,787 21 Fixed-Spread Single Currency Loans Outstandmng 3,200 3 968 1 Undisbursed 4,198 11 2,187 5 Other Loans Outstanding 983 1 1,458 1 2,631 2 Unchsbursed - - - - 5 Total * Outstandingloans $118,866 100 $120,104 100 $117,228 100 Undisbursed loans $ 37,934 100 $ 44,754 100 $ 51,372 100 a Of which single currency loans with non-standard terms represent $11,301 million outstanding ($10,801 million-June 30, 2000 and $9,035 million-June 30, 1999) At June 30, 2001, $500 mtllion was undisbursed b Includes fixed-rate single currency loans for which the rate had not yet been fixed at fiscal year-end Indwcates amounts less than 0 5% May differ from the sum of individual figures due to rounding Guarantees tional costs involved for IBRD IBRD prices guarantees IBRD offers guarantees on loans from private investors consistent with the way it prices its loans for projects in countries eligible to borrow from IBRD IBRD may provide partial risk guarantees for export- In exceptional cases, IBRD may offer enclave guaran- oriented projects in an IDA-only country (enclave tees for loans for foreign-exchange generating projects guarantees) if the project is expected to generate for- in a member country usually eligible only for credits eign exchange outside the country, and IBRD deter- from IDA. IBRD applies the same country creditwor- mines that the country will have adequate foreign thiness and project evaluation criteria to guarantees as exchange to meet its obligations under the counter- it applies to loans IBRD has also provided guarantees guarantee if the guarantee is called. A project covered of securities issued by entities eligible for IBRD loans by an enclave guarantee includes secunty arrange- IBRD guarantees can be customized to suit varying ments with appropriate risk mitigation measures, such country and project circumstances They can be tar- as offshore revenue escrow accounts and debt-service geted to mitigate specific risks, generally risks relating reserves acceptable to IBRD, to minimize IBRD's to political, regulatory and government performance, exposure and the risk of a call on the guarantee. Spe- which the private sector is not normally in a position cial charges apply to these types of guarantees The to absorb or manage The three basic types of guaran- commitment of enclave guarantees is initially limited tees offered are described in Box 5. to an aggregate guaranteed amount of $300 million As of June 30, 2001 no enclave guarantees were out- Each guarantee requires the counter-guarantee of the standing member government Guarantees are priced within a limited range to reflect the risks involved, and prepa- IBRD's exposure at June 30, 2001 on its guarantees ration fees may be charged where there are excep- (measured as their present value in terms of their first 14 THE WORLD BANK ANNUAL REPORT 2001 Box 5: Guarantee Instruments * Partial risk guarantees cover debt-service defaults on a loan that may result from nonperformance of govern- ment obligations These are defined in the contracts negotiated between the government or a government- sponsored entity and the private company responsible for implementing the project The IBRD guarantee is limited to backing the government's obligations, the obligations of the private company contained in the project agreements are not covered and thus the private lenders assume the risk of nonperformance by the private company * Partial credit guarantees are used for public sector projects when there is a need to extend loan maturities and guarantee specified interest or principal payments on loans to the government or its instrumentalities This approach may be most appropriate when the lenders are not willing to accept the sovereign risk of the host government for a term long enough to meet the needs of the project By guaranteeing later maturities, such partial credit guarantees help induce the market to extend the term to the maximum risk it can bear * Policy-based guarantees are partial credit guarantees that cover a portion of debt-service on a borrowing by an eligible member country from private foreign creditors in support of agreed structural, institutional and social policies and reforms. These guarantees are an extension of partial credit guarantees for projects The guaranteed portion of the debt-service could consist of a combination of interest and principal payments, but the actual structure is determined on a case-by-case basis Elgibility for IBRD adjustment lending is a necessary condition for eligibility for this type of instrument The terms of this instrument are the same as project-based partial credit guarantees Matunty and level of fees will be standard if the guarantee is made in situations comparable to those under which a structural adjustment loan would be made, however, if the guarantee is made in connection with a special structural adjustment loan, then it will be at special struc- tural adjustment loan equivalent terms This guarantee product was launched in FY 1999. Initially, IBRD is proceeding with a pilot program of up to $2,000 million. As of June 30, 2001, $409 million had been approved Once the $2,000 million level is reached, the Executive Directors will review the program call date) are detailed in Table 6 For additional infor- provides courses and other training activities related to mation see the Notes to Financial Statements-Note C economic policy development and administration for governments and organizations that work closely with Table 6: Guarantee Exposure IBRD In milions of US doUars Trust Fund Administration IBRD, alone or jointly with FY 2001 FY 2000 FY 1999 IDA, administers on behalf of donors, funds restncted Partial risk 473 468 467 for specific uses These funds are held in trust and are Partial credit 501 663 1,058 not included in the assets of IBRD See the Notes to Policy based 402 245 - Financial Statements-Note I Total 1,376 1,376 1,525 Investment Management IBRD has leveraged its trea- sury management capacity and infrastructure to pro- Other Activities vide investment management services to an extemal institution for a fee These funds are not included in Consultation In addition to its financial operations, the assets of IBRD IBRD provides technical assistance to its member countries, both in connection with, and independently of, loan operations There is a growing demand from 4. LIQUIDITY MANAGEMENT borrowers for strategic advice, knowledge transfer, and IBRD's liquid assets are held principally in obligations capacity building Such assistance includes assigning of governments and other official entities, time depos- qualified professionals to survey developmental its and other unconditional obligations of banks and opportunities in member countries, analyzing their financial institutions, currency and interest rate swaps, fiscal, economic and developmental environment, asset-backed securties, and futures and options con- assisting member countries in devising coordinated tracts perdtaecing to such oblgatnons development programs, appraising projects suitable for investment and assisting member countries in Liquidity risk arises in the general funding of IBRD's improving their asset and liablity management tech- activities and in the management of its financial posi- niques. tions It includes the risk of being unable to fund its Reh daimember portfolio of assets at appropriate maturities and rates Research and Traoning To assist Its developmig and the risk of being unable to liquidate a position in a countries, IBRD-through the World Bank Institute- timely manner at a reasonable price. The objective of IBRD MANAGEMENT'S DISCUSSION ANDANALYSIS JUNE 30,2001 15 liquidity management is to ensure the availability of At the end of FY 2001, the aggregate size of the IBRD sufficient cash flows to meet all of IBRD's financial liquid asset portfolio stood at $24,181 million, little commitments changed from FY 2000 This portfolio is largely com- posed of U S dollars, with the currency composition Under IBRD's liquidity management policy, aggregate of the operational portfolio varying the most as a liquid asset holdings should be kept at or above a spec- result of the cash flows generated by disbursements ified prudential minimum. That minimum is equal to debt-servie paym es, gnew eboro insnrseres the highest consecutive six months of debt service conversions obligations for the fiscal year, plus one-half of net approved loan disbursements as projected for the fis- The performance of the liquid asset portfolio in FY cal year The FY 2002 prudential minimum liquidity 2001 compared to FY 2000 is presented in Table 7. level has been set $20.1 billion, representing a $1.7 These returns exclude investment assets funding cer- billion increase over that for FY 2001 IBRD also holds tain other postemployment benefits liquid assets over the specified minimum to provide flexibility in timing its borrowing transactions and to meet working capital needs. Annualized Financral Liquid assets are held in three distinct sub-portfolios. Retumn (%) stable, operational, and discretionary, each with differ- FY2001 FY2000 ent risk profiles, funding, structures and performance benchmarks IBRD Overall Portfolio 6 29 5 75 The stable portfolio is principally an investment port- Stable Portfolio 6 55 5 93 folio holding the prudential minimum level of liquid- Operational Portfolio 5 39 5 39 ity, which is set at the beginning of each fiscal year. Discretionary Portfolio - 5 27 The operational portfolio provides working capital for IBRD's day-to-day cash flow requirements. The higher returns in FY 2001 are due primarily to The discretionary portfolio provides flexibility for the higher interest earnings in FY 2001, as well as higher execution of IBRD's borrowing program and can be mark-to-market gains resulting from a falling U.S. dol- used to take advantage of attractive market opportuni- lar interest rate environment. Although rates ties. The discretionary portfolio was gradually liqui- decreased significantly in the latter half of FY 2001, dated over the first half of FY 2000. This discretionary interest income from IBRD's liquid asset portfolio was portfolio was not used during FY 2001. Figure 3 rep- not impacted immediately by the full effect of the resents IBRD's liquid asset portfolio size and structure decline because of the lag on repricing. at the end of FY 2001 and FY 2000, excluding invest- ment assets associated with certain other postemploy- ment benefits Figure 3: Liquid Asset Portfolio Composition (In millwns of US dollars) June 30, 2001 June 30, 2000 Stable Portfoho Stable Portfolio $20,101 $18,544 83% 77% Operational Portfolio Operational Portfolio $4,080 $5,649 17% 23% 16 THE WORLD BANK ANNUAL REPORT 2001 5. FUNDING RESOURCES cient to absorb plausible risks and support normal loan growth, without reliance on additional shareholder Equity capital. Total shareholders' equity, as reported in IBRD's bal- ance sheet at June 30, 2001, was $29,570 million The equity-to-loans ratio is a summary statistic that compared with $29,289 million at June 30, 2000 The IBRD uses as one measure of the adequacy of its risk- increase from FY 2000 primarily reflects the increase bearing capacity. See discussion in Section 6, Financial 1 f o 11 rr r n ~~~Risk Management-Managing Risk-Bearing Capacity in retained earnings of $824 million, offset by fluctua- tions in the amounts to maintain value of currency As presented in Figure 4, IBRD has maintained a rela- holdings tively stable equity-to-loans ratio on both a reported For management purposes, IBRD closely monitors basis (excluding cumulative translation adjustments equity as defined and utilized in the equity-to-loans associated with the FAS 133 adjustments) and a cur- ratio Table 8 presents the composition of this mea- rent value basis sure of equity at June 30, 2001 and 2000. This ratio rose slightly to 21 42% at June 30, 2001, IBRD's equity base plays a critical role in securing its from 21 23% one year earlier In accordance with the financial objectives. By enabling IBRD to absorb risk financial policy defining this ratio, the amount of out of its own resources, its equity base protects share- transfer to general reserves of $618 million approved holders from a possible call on callable capital. The on August 2, 2001 was included in this ratio at June adequacy of IBRD's equity capital is judged on the 30, 2001 ($1,114 million-June 30, 2000) basis of its ability to generate future net income suffi- Table 8: Equity Capital !n millions of US dollars June 30, 2001 June 30, 2000 Usable Capital Paid-in Capital $ 11,476 $ 11,418 Net Receivable for Maintenance of Value (1,102) (898) Restricted Paid-in Capital (2,473) (2,328) Total Usable Capital 7,901 8,192 Special Reserve 293 293 General Reserve, including prospective allocation of FY 2001/FY 2000 net income 17,841 17,223 Cumulative Translation Adjustmenta (1,126) (641) Equity used in Equity-to-Loans Ratio-Reported Basis' $ 24,909 $ 25,067 Current Value Adjustments 801 Current Value Equity used in Equity-to-Loans Ratio $ 25,710 Loans and Guarantees Outstanding, net of Accumulated Provision for Loan Losses $116,283 $118,080 Current Value Loans and Guarantees Outstanding, net of Accumulated Provi- sion for Loan Losses $120,479 Equity-to-Loans Ratio-Reported Basisa 21.42% 21.23% Current Value Equity-to-Loans Ratio 21.34% a Excluding cumulatve translanon amounts associated with the FAS 133 adjustment IBRDMANAGEMENT'SDISCUSSIONANDANAIYSIS JUNE30,2001 17 Figure 4- Equity-to-Loans Ratio rencies of the subscribing members While these resolutions are not legally binding on future 25 0% Boards of Governors, they do record an under- 24 0% standing among members that this amount will 23 0% not be called for use by IBRD in its lending activ- 22 0% Reported Basis Ities or for administrative purposes 21 0% No call has ever been made on IBRD's callable capital. 20 0% Any calls on unpaid subscriptions are required to be 19 0% Current Valuc uniform, but the obligations of the members of IBRD 18 0% to make payment on such calls are independent of 17 0% each other. If the amount received on a call is insuffi- 16 0% cient to meet the obhgations of IBRD for which the 15 0% - I , I , , ,, ,I, I . I . . , ,, , call is made, IBRD has the right and is bound to make In xo r- x0 oo cD further calls until the amounts received are sufficient to meet such obligations. However, no member may - ~ ~ ~ ~ ~ ~ be required on any such call or calls to pay more than the unpaid balance of its capital subscription Capital At June 30, 2001, $103,604 million (58%) of the The authozed capltal of IBRD at June 30, 2001 was uncalled capital was callable from the member coun- $190,811 millon, of whtch $189,505 mill,on had tries of IBRD that are also members of the Develop- been subscrbed Of the subscribed capital, $11,476 ment Assistance Committee of the Organization for millon had been paid in and $178,029 mllion was Economic Cooperation and Development (DAC- callable Of the paid-in capital, $7,882 million was OECD). This amount was equal to 93 0% of IBRD's abaleaborlefndmng Thenderms $3,594 payment ofas n cap- outstanding borrowings after swaps at June 30, 2001 able for lending The terms of payment of IBRD's cap- Table 9 sets out the capital subscnlptions of those ital and the restrictions on its use that are derived countrles and the callable amounts. from the Articles and from resolutions of IBRD's Board of Governors are The United States is IBRD's largest shareholder of IBRDs capital was initially paid Under the Bretton Woods Agreements Act, the Par (i) $2,611 million o r was capital by the Value Modification Act and other U S. legislation, the n gold or U.S dollars or was converted by the Secretary of the U.S Treasury is permitted to pay up subscribng members into U S dollars Thls to $7,663 milhon of the uncalled portion of the sub- amount may, under the Articles, be freely used by scription of the United States, if it were called by IBRD in its operations IBRD, without any requirement of further congres- (u) $8,865 million of IBRD's capital was paid in the sional action The balance of the uncalled portion of currencies of the subscribing members. Under the the U.S subscrnption, $22,303 million, has been Articles this amount is subject to maintenance of authorized by the U S. Congress but not appropriated value obligations and may be loaned only with Further action by the U S Congress would be required the consent of the member whose currency is to enable the Secretary of the Treasury to pay any por- involved In accordance with such consents, tion of this balance The General Counsel of the U.S $4,937 million of this amount had been used in Treasury has rendered an opinion that the entire IBRD's lending operations at June 30, 2001. uncalled portion of the U.S subscription is an obliga- tion backed by the full faith and credit of the United (iii) $151,604 million of IBRD's capital may, under States, notwithstanding that congressional appropria- the Articles, be called only when required to tions have not been obtamed with respect to certain meet obligations of IBRD for funds borrowed or portions of the subscription. on loans guaranteed by it This amount is thus not available for use by IBRD in making loans. Pay- ment on any such call may be made, at the option of the particular member, either in gold, in U.S dollars or in the currency required to discharge the obligations of IBRD for which the call is made (Iv) $26,425 million of IBRD's capital is to be called only when required to meet obligations of IBRD for funds borrowed or on loans guaranteed by it, pursuant to resolutions of IBRD's Board of Gov- ernors (though such conditions are not required by the Articles). Of this amount, 10% would be payable mn gold or U S dollars and 90% in the cur- 18 THE WORLD BANK ANNUAL REPORT 2001 Table 9: DAC-OECD Capital Subscriptions including loan disbursements, refinancing of maturing debt and prefunding of future lending activities. The In mtllions of US dollars increase in funding in FY 2001 was primarily attribut- Total Capital Uncalled Portion able to the replacement of both maturing issues and Member Country/ Subscnption of Subscrption issues called All proceeds from new funding are ini- tially invested in the liquid asset portfolio until they United States $ 31,965 $ 29,966 are required for IBRD's operations Debt is allocated Japan 15,321 14,377 on a penodic basis to the different debt pools funding Germany 8,734 8,191 loans as necessary, in accordance with operating guide- France 8,372 7,851 lines. In FY 2001, IBRD followed a strategy of selec- United Kingdom 8,372 7,832 tive bond issuance, composed of cost-effective private Canada 5,404 5,069 placements, largely pre-sold institutional public issues Italy 5,404 5,069 and retail targeted transactions. Netherlands 4,283 4,018 Table 10: Funding Operations Indicators Belgium 3,496 3,281 Spain 3,377 3,171 FY 2001 ____200 Switzerland 3,210 3,012 Total Medium- and Long-term Australia 2,951 2,770 Borrowmgsa (USD million) $17,033 $15,789 Sweden 1,806 1,696 Average Maturityb (years) 6 5 5 8 Denmark 1,623 1,525 Number of Transactions 232 148 Austria 1,335 1,254 Number of Currencies 9 13 Norway I,204 1, 132 a Includes one-year notes and represents net proceeds on a Finland 1,033 971 trade date basis New Zealand 873 821 b On afirst call basis Portugal 659 620 Ireland 636 599 IBRD strategically repurchases, calls or prepays its Greece 203 189 debt to reduce the cost of borrowings and to reduce Luxembourg 199 190 exposure to refunding requirements in a particular Total $110,460 $103,604 year or meet other operational needs In response to market conditions, during FY 2001, IBRD repur- chased $859 million and called $3,430 million of its a See details regarding the capital subscnptwons of all mem- outstanding borrowings. bers of IBRD at June 30, 2001 in Financial Statements- Statement of Subscnpttons to Capital Stock and Voting Use of Derivatives Power IBRD engages in a combination of interest rate and currency swaps to convert direct borrowings into a For a further discussion of capital stock, restricted cur- desired interest rate structure and currency composi- rencies, maintenance of value and membership refer tion Interest rate and currency swaps are also used for to the Notes to Financial Statements-Summary of Sig- asset/liability management purposes to match the nificant Accounting and Related Policies and Note A pool of liabilities as closely as possible to the interest Borrowings rate and currency characternstics of liquid assets and loans Source of Funding In FY 2001, the majority of new funding continued to IBRD diversifies its sources of funding by offering its be initially swapped into floating rate U S dollars, with securities to institutional and retail investors globally, conversion to other currencies or fixed-rate funding Under its Articles, IBRD may borrow only with the being carried out subsequently in accordance with approval of the member in whose markets the funds funding requirements are raised and the member in whose currency the bor- rowing is denominated, and only if each such member Composition of Borrowings agrees that the proceeds may be exchanged for the Of the borrowings outstanding after swaps at June 30, currency of any other member without restriction. 2001, 56% was at variable rates (55% at June 30, 2000). The currency composition continues to be con- Funding Operations centrated in U.S dollars, with its share at the end of In FY 2001, medium- and long-term debt raised June 30, 2001 at 84% of the borrowings portfolio,after directly in financial markets by IBRD amounted to swaps (80% at June 30, 2000) This reflects IBRD bor- $17,033 million compared to $15,789 million in FY rowers' preference for U S dollar-denominated loans 2000. Table 10 summarizes IBRD's funding opera- and the corresponding currency composition of the tions for FY 2001 and FY 2000. Funding raised m any liquid asset portfolio. given year is used for IBRD's general operations, IBRD MANAGEMENT'S DISCUSSIONANDANALYSIS:JUNE 30,2001 19 A more detailed analysis of borrowings outstanding is policies and procedures for measuring and managing provided in the Notes to Financial Statements- such risks are formulated, approved and communi- Note D. cated throughout IBRD Senior managers represented on the Committee are responsible for maintaining sound credit assessments, addressing transaction and 6. FINANCIAL RISK MANAGEMENT product risk issues, providing an independent review IBRD assumes various kinds of risk in the process of function and monitoring the loans, investments and providing development banking services Its activities borrowings portfolios can give rise to four major types of financial risk. The processes and procedures by which IBRD man- credit risk, market risk (interest rate and exchange ages its risk profile continually evolve as its activities rate), liquidity risk; and operating risk The major change in response to market, credit, product, and inherent risk to IBRD is country credit risk, or loan other developments The Executive Directors, partic- portfolio risk ularly the Audit Committee members, periodically Governance Structure review trends in IBRD's risk profiles and performance, as well as any significant developments in risk manage- The risk management governance structure includes ment policies and controls an Asset/Liability Management Committee chaired by the Chief Financial Officer This committee makes Managing Risk-Bearing Capacity recommendations to senior management in the areas IBRD assesses its risk-beanng capacity using a variety of financial policy, the adequacy and allocation of risk of metrics, including a stress test and an equity-to- capital, and oversight of financial reporting The Mar- loans ratio, to measure its income generating capacity ket Risk and Currency Management Subcommittee and capital adequacy reports to the Asset/Liability Management Commit- tee This subcommittee develops and monitors the The stress test measures the level of loan growth policies under which market and commercial credit which could be supported by IBRD in the wake of a risks faced by IBRD are measured, reported and man- significant credit shock, without further deterioration aged The subcommittee also monitors compliance in IBRD's capital position The nonaccrual event used with policies governing commercial credit exposure in the stress test is an estimate of the amount of the and currency management Specific areas of activity loan portfolio that could enter nonaccrual status (pay- include establishing guidelines for limiting balance ment arrears in excess of six months) in the next three sheet and market risks, the use of derivative instru- years at a 95% confidence level ments, and monitoring matches between assets and IBRD uses the equity-to-loans ratio (on a current value their funding basis) as one tool to monitor the sensitivity of its risk- Country credit risk, the primary nsk faced by IBRD, is bearing capacity to movements in interest and identified, measured and monitored by the Country exchange rates One of IBRD's financial risk manag- Credit Risk Department, led by the Chief Credit ment objectives is to seek to protect the equity-to- Officer This unit is independent from IBRD's busi- loans ratio from movements arising from market risks ness units and reports to IBRD's senior management To the extent that the duration of its equity capital is Ines unitsandreports to IBRDsy sveniorm anagemrent. matched to that of its loan portfolio, this ratio is pro- In addition to continuously reviewing the creditwor- tected against interest rate movements To the extent thiness of IBRD borrowers, this department is respon- that the currency composition of its equity capital is sible for assessing loan portfolio risk, determining the matched with that of its loan portfolio, this ratio is adequacy of provisions for loan losses, and monitoring protected from exchange rate movements borrowers that are vulnerable to crises in the near term The Chief Credit Officer represents IBRD's As presented in Figure 4 in Section 5, Funding Chief Financial Officer on the Operations Committee, Resources, IBRD has maintained a relatively stable which reviews IBRD's Country Assistance Strategies equity-to-loans ratio on both the current value and and selected planned adjustment loans reported basis. Market risks, liquidity risks and counterparty credit Credit Risk risks in IBRD's financial operations are identified, measured and monitored by the Corporate Finance Country Credit Risk Department, which is independent from IBRD's busi- IBRD's Credit Risk Department continuously reviews ness units The Corporate Finance Department works the creditworthiness of its borrowing member coun- with IBRD's financial managers, who are responsible tries. These reviews are taken into account in deter- for the day-to-day management of these risks, to mining its overall country programs and lending establish and document processes that facilitate, con- operations, used to estimate the appropriate level of trol and monitor risk These processes are built on a provisions for loan losses, and used to assess the ade- foundation of initial identification and measurement quacy of IBRD's income-generating capacity and risk- of risks by each of the business units Under the direc- bearing capital In keeping with standard practice, tion of the Asset/Liability Management Committee, expected losses inherent in the portfolio due to coun- 20 THE WORLD BANK ANNUAIL REPORT 2001 try credit risk are covered by the accumulated provi- Figure 5: sion for loan losses, while unexpected losses due to Top Eight Country Exposures at June 30, 2001 country credit risk are covered by income-generating capacity and risk-bearing capital 16 0 - The credit quality of IBRD's loan portfolio deterio- 14 0 Exposure Limit ($13 5 billion) rated in FY01, reflecting an increase in the volume of 12 0 loans in nonaccrual status and a net detenoration in the risk ratings assigned to IBRD borrowers by the 10 0 Credit Risk Department. While the changes in the 8 0 risk ratings of IBRD's borrowers largely reflect coun- 60 t try-specific developments, the Credit Risk Depart- ment's overall assessment of IBRD portfolio risk also 4 0 reflects a less favorable baseline global outlook for 2 0 I many developing countries During FY 2001, loans to _ two borrowers were placed in nonaccrual status. The 0 0 _ total outstanding prmcipal of loans to these borrowers N o - m at June 30, 2001 was $921 million Both the increase c U c - M in the volume of loans in nonaccrual status and the net deterioratlon in borrowers' risk ratings are reflected in the provisioning charge of $676 million in FY01 Since the current exposure data presented are at a Portfolio concentration risk, which anses when a small point in time, evaluating these exposures relative to group of borrowers account for a large share of loans the limit requires consideration of the repayment pro- outstanding, is a key concern for IBRD and is carefully files of existing loans, as well as disbursement profiles managed through a single borrower exposure limit and projected new loans and guarantees According to an approach approved by the Executive Overdue and Non-performing Loans Directors in 1997, the single borrower exposure limit It is IBRD'~ policy that if a payment of principal, is set at the lower of an equitable access l mit Is mterest or other charges on an IBRD loan or IDA concentration risk limit The equitable access limit is grdtbcms3 asoeru,n e on ota equal to 10% of IBRD's subscribed capital, reserves credit becomes 30 days overdue, no new loans to that and unallocated surplus, and the concentration limit is country, ore to ther borrower Dinetha estimated by stress testing IBRD's income-generating country, will be presented to the Executlve Dlrectors capacity and risk-beanng capital (taking into account for approval, nor will any previously approved loan be not only current exposure - loans outstanding plus the signed, until payment for all amounts 30 days overdue valu o guarant es - butasoaprojected tex or longer has been received. In addition, if such pay- present valuement becomes 60 das overdue disbursements on all sure over the ensuing three- to five-year period) The ment omesa60edays merd e r cou ntry are single borrower exposure limit is determined by the loans to or guaranteed by that member country are Executive Directors each year at the time they con- suspended until all overdue amounts have been paid sid e RDreservs aeqacy an the al oa tion- o Where the member country is not the borrower, the Its net income from the preceding fiscal year For F time period for suspension of the approval and signing 2002, the concentration risk limit is $13 5 billion of new loans to or guaranteed by the member country unchanged from FY 2001 The equitable access limit is 45 days and the time period for suspension of dis- unchanged from FY 2001 The equitable . access limit bursements is 60 days. It is the policy of IBRD to place is $20.8 billion. As depicted in Figure 5, IBRD's larg- est exposure (including the present value of guaran- all loans made to or guaranteed by a member of IBRD es) to a single borrowing cou present was .6ueof bon- in nonaccrual status, if principal, interest or other at June 30, 2001 charges on any such loan are overdue by more than six months, unless IBRD determines that the overdue amount will be collected in the immediate future IBRD maintains an accumulated provision for loan losses to recognize the risk inherent in both the accrual and nonaccrual portfolios The methodology for determining the accumulated provision for loan losses is discussed under Accumulated Provision for Loan Losses In 1991, the Executive Directors adopted a policy to assist members with protracted arrears to IBRD to mobilize sufficient resources to clear their arrears and to support a sustainable growth-oriented adjustment program over the medium term Under this policy, IBRD will develop a lending strategy and will process loans, but not sign or disburse such loans, during a pre- IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2001 21 clearance performance period with respect to mem- present value of guarantees), and the assumed severity bers that. (a) agree to and implement a medium-term, of loss given default growth-oriented structural adjustment program endorsed by IBRD, (b) undertake a stabilization pro- Estimatmg probable expected losses s inherently ga,If necessary, endorsed, or financially supported, uncertain and depends on many factors IBRD period- gram, if necess ary Func) ag rte ically reviews such factors and reassesses the adequacy by the International Monetary Fund, (c) agree to a o h cuuae rvso o onlse cod financing plan to clear all arrears to IBRD and other of the accumulated provision for loan losses accord- multilateral creditors in the context of a medium-term ing y yuaores may ingeer m acrecosses structural adjustment program, and (d) make debt- due to unforeseen changes In general macroeconomic service payments as they fall due on IBRD loans dur- and politincal condtons, unexpected correlations ing the performance period. The signmg, effectiveness withi the portfolio, and other external factors. and disbursement of such loans will not take place Additional information on IBRD's loan loss provision- until the member's arrears to IBRD have been fully ing policy and status of nonaccrual loans can be found cleared in the Notes to Financial Statements-Summary of Sig- On May 8, 2001, based on a precedent established m nificant Accounting and Related Policies, and Note C 1975 after Bangladesh became independent from Commercial Credit Risk Pakistan, and followed with respect to Bosnia and Herzegovina in 1996, IBRD's Executive Directors IBRDs commercial credit risk IS concentrated i authorized IBRD to enter into an agreement with the mvestments in debt instruments issued by sovereign Federal Republic of Yugoslavia (FRY) with respect to a governements, agencies, banks and corporate entities. plan for the clearance of arrears under loans to the The majority of these investments are in AAA and AA former Socialist Federal Republic of Yugoslavia for rated instruments. which FRY has accepted liability. Under the arrears In the normal course of its business, IBRD utilizes var- clearance plan, FRY's pnncipal and interest arrears will ious denvatives and foreign exchange financial instru- be consolidated into one or more new IBRD loans ments to meet the financial needs of its borrowers, to The exact terms of these consolidation loans will be generate income through its investment activities and negotiated with FRY authorities. to manage its exposure to fluctuations in interest and It is IBRD's practice not to reschedule interest or prin- currency rates. cipal payments on its loans or participate in debt Derivative and foreign exchange transactions involve rescheduling agreements with respect to its loans credit nsk The effective management of credit risk is IBRD's treatment of FRY is an exception to that prac- vital to the success of IBRD's funding, investment and tive, based on criteria approved by the Executive assetAliability management activities The monitonng Directors in connection with the financial assistance and managing of these risks is a continuous process package for Bosnia and Herzegovina in 1996 These due to changing market environments cnteria limited eligibility for such treatment to a coun- try that has emerged from a current or former mem- IBRD controls the credit risk arising from derivatives ber of IBRD, that is assuming responsibility for a share and foreign exchange transactions through its credit of the debt of such member; that because of a major approval process, the use of collateral agreements and armed conflict m its territory involving extensive nsk limits, and monitoring procedures The credit destruction of physical assets, has limited creditwor- approval process involves evaluating counterparty thmness for servicing the debt it is assuming, and for creditworthiness, assigning credit limits and determin- which a rescheduling/refinancing would result in a sig- ing the risk profile of specific transactions Credit lim- nificant improvement in its repayment capacity, if its are calculated and monitored on the basis of appropriate supporting measures are taken. IBRD potential exposures taking into consideration current does not believe that any other borrowers with loans market values, estimates of potential future move- in nonaccrual status currently meet these eligibility ments in those values and collateral agreements with criteria. counterparties If there is a collateral agreement with the counterparty to reduce credit risk, then the Accumulated Provision for Loan Losses amount of collateral obtained is based on the credit IBRD's accumulated provision for loan losses reflects rating of the counterparty Collateral held mcludes the inherent collectibility risk in its nonaccrual and cash and government secunties accrual portfolios Management determines the IBRD treats the credit risk exposure as the replace- appropriate level of accumulated provisions for loan pBRD treats the drivat r fore ange rod- losses by estimating the probable expected losses ment cost of the derivative or foreign exchange prod- lossesrbyestimating the porfooonbablerro ter borwes uct This is also referred to as replacement risk or the inherent in the portfolio on a borrower-by-borrower mark-to-market exposure amount While contractual basis for both the nonaccrual and accrual portfolios at principal amount i slye volume the balance sheet date The appropnate level of provi- principal amount is the most commonly used volume sions for each borrower is estimated as the sum prod- measure in the derivative and foreign exchange mar- uct of its expected default frequency (or probability of kets, It Is not a measure of credit or market risk default to IBRD), its loans outstanding (plus the 22 THE WORLD BANK ANNUAL REPORT 2001 Mark-to-market exposure is a measure, at a point in Market Risk time, of the value of a derivative or foreign exchange IBRD faces risks which result from market move- contract in the open market. When the mark-to-mar- ments, primarily interest and exchange rates In com- ket is positive, it indicates the counterparty owes parison to country credit risk, IBRD's exposure to IBRD and, therefore, creates an exposure for IBRD market risks is small IBRD has an integrated asset/ha- When the mark-to-market is negative, IBRD owes the bility management framework to flexibly assess and counterparty and does not have replacement risk hedge market nsks associated with the characteristics When IBRD has more than one transaction outstand- of the products in IBRD's portfolios ing with a counterparty, and there exists a legally- Asset/Liability Management enforceable master derivatives agreement with the counterparty, the "net" mark-to-market exposure rep- The objective of asset/iability management for IBRD resents the netting of the positive and negative expo- is to ensure adequate funding for each product at the sures with the same counterparty If this net mark-to- most attractive available cost, and to manage the cur- market is negative, then IBRD's exposure to the coun- rency composition, maturity profile and interest rate terparty is considered to be zero Net mark-to-market sensitivity characteristics of the portfolio of liabilities is, in IBRD's view, the best measure of credit risk supporting each lending product in accordance with when there is a legally enforceable master derivatives the particular requirements for that product and agreement between IBRD and the counterparty which within prescribed risk parameters contains legally enforceable close-out netting provi- Table 12 details the mark-to-current value of each sions. For the contractual value, notional amounts and loan product and the debt allocated to fund it related credit risk exposure amounts by instrument, see the Notes to Financial Statements-Note F The overall positive mark to current value on loans Table II provides details of IBRD's estimated credit indicates that the loans in the portfolio, on average, exposure on its invetmetsndwacarry a higher rate of interest than the present dis- exposure on Its nvestments and swaps, net or conat- count rate, which represents the rate at which IBRD eral held, by counterparty rating category. would originate a similar loan at June 30, 2001. The The decline in the proportion of AAA rated invest- positive mark-to-current value in the borrowings port- ments and the corresponding increase in the propor- folio represents the fact that the average cost of the tion of AA rated investments, compared to the pnor borrowings portfolio is higher than the rate at which year, is mainly due to the downgrading of Japanese IBRD could currently obtain funding for similar matu- government securities during FY 2001. After the rities Table 13 summanzes the year-to-date effect on effects of master netting arrangements, the swap credit equity of markmng the portfolios to current value exposure of $560 million is offset by collateral of $338 million, which results in a total net swap exposure of $222 million Table 11: Credit Exposure by Counterparty Rating In mtllions of US dollars At June 30, 2001 At June 30, 2000 At June 30, 1999 Investments Agencies, Net Total Exposure Total Exposure Total Exposure Counterparty Banks & Swap on Investments % of on Investments % of on Investments % of Ranng Soveretgns Corporates Exposure and Swaps Total and Swaps Total and Swaps Total AAA $ 42 $ 8,998 $185 $ 9,225 39 $12,307 49 $12,513 41 AA 3,157 10,348 22 13,527 56 10,917 44 15,449 51 A - 1,154 15 1,169 5 1,802 7 2,311 8 Total $3199 $20,500 $222 $23,921 100 $25,026 100 $30,273 100 IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2001 23 Table 12: Financial Instrument Portfolios In millions of US. dollars At June 30, 2001 Carrying Contractual Current Value Yield Value Mark Loansa $118,866 6.35% $4,196 Variable-Rate Multicurrency Pool Loans 30,258 5.07 1,567 Single Currency Pool Loansb 30,492 8.61 2,209 Variable-Spread Single Currency Loans c 27,614 4 93 33 Fixed-Rate Single Currency Loans 14,989 6 69 337 Nonstandard Single Currency Loans 11,301 6.89 18 Fixed-Spread Single Currency Loans 3,200 4.91 9 Other Fixed Rate Loans 1,012 8 26 23 Liquid Asset Portfoliod, e $ 24,181 4.33% Borrowingsd $114,850 5.32% $3,397 Variable-Rate Multicurrency Pools 19,150 4 55 1,510 Single Currency Pools 20,635 7 76 1,385 Variable-Spread Single Currency 21,968 4.48 (187) Fixed-Rate Single Currency 12,958 6 16 221 Nonstandard Single Currency 11,390 4 43 (59) FLxed-Spread Single Currency 1,694 4.83 (9) Other Debtf 27,055 4.74 536 a. Contractual yield is presented before the application of interest waivers b Excludes fixed-rate single currency pool loans, whtch have been classifted in other fixed-rate loans c Includes fixed-rate single currency loans for which the rate had not yet been ftxed at fiscal year-end. d. Carrying amounts and contractual yields are on a basis whtch includes accrued interest and any unamortized amounts. e. The liquid asset portfolio is carried and reported at market value f Includes amounts not yet allocated at June 30, 2001 Table 13: Summary of Current Value Adjustments In millions of US. dollars Balance Sheet Effects as of June 30, 2001 Total Income Other Statement Effect Loans Borrowings Asset/Liability FY 2001 Total Current Value Adjustments on Balance Sheet $4,196 $(3,397) $2 $ 801a Unrealized Gams on Investments 51b Currency Translation Adjustment (485)c Total Current Value Adjustments $ 367 a Includes $116 million representing a one-time cumulative effect of recording the adoption, on July 1, 2000, of the current value basis of accounting b Unrealized gains on the tnvestment portfolio have been moved from Operating Income under the reported basis and included as part of current value adjustments for current value reporting c. The currency translation effects have been movedfrom Other Comprehensive Income under the reported basis and included in Comprehensive Current Value Net Income for purposes of current value reporting 24 THE WORLD BANK ANNUAL REPORT 2001 Use of Derivatives swaps are being transacted in a phased manner over As part of its asset/liability management process, the next four years The present value of the remain- IBRD employs derivatives to manage and align the ing overfunded portion of the above market debt is characteristics of its assets and liabilities IBRD uses approximately $250 million as of June 30, 2001. The derivative instruments to adjust the mterest rate loss attributable to the combined position will be repricing characteristics of specific balance sheet assets passed as a rate adjustment to the multicurrency pool and liabilities, or groups of assets and liabilities with loans. similar repricing characteristics, and to modify the Interest rate risk on non-cost pass-through products, currency composition of net assets and liabilities which currently account for 26% of the existing loan Interest Rate Risk portfolio (22% at the end of FY 2000), is managed by There are two potential sources of interest rate risk to using interest rate swaps to closely align the rate sensi- There The firpotestis s interest r ate s v soci- tivity charactenstics of the loan portfolio with those of IBRD. The first is the interest rate sensitivity associ- thiunelngfdngAtepofloofixd ated with the net spread between the rate IBRD earns their underlyng fundig As the portfolno of fixed- on its assets and the cost of borrowings, which fund spreadloans increases the proportion ofinon-cost those assets The second Is the interest rate sensitivity pass-though products will grow The interest rate risk ths asst Th seon is th itres rat sestvt on IBRD's hlquid portfolio is managed within specified of the income earned from funding a portion of IBRD on-IR smliui lio is managed withi s i assets with equity The borrowing cost pass-through duration-mlsmatch limits and is further lmited by formulation mcorporated in the lending rates charged stop-loss lmits on most of IBRD's existing loans has traditionally Because equity funds a portion of outstanding loans, helped limit the interest rate sensitivity of the net IBRD's level of net income is sensitive to movements spread earnings on its loan portfolio Such cost pass- in the level of nominal interest rates. In general, lower through loans currently account for approximately nominal interest rates result in lower lending rates 74% of the existing outstanding loan portfolio (78% at which, in turn, reduce the nominal earnings on the end of FY 2000) Of these cost pass-through loans, IBRD's equity the multicurrency pool loans do pose some residual interest rate nsk, given the six month lag inherent in Interest rate risk also arises from a variety of other fac- the lending rate calculation. Since multicurrency pool tors, including differences in the timing between the loan terms are no longer available for new commit- contractual maturity or reprcing of IBRD's assets, lia- ments, this risk will diminish as the existing loans bilities and derivative financial instruments. On float- mature. ing rate assets and liabilities, IBRD is exposed to timing mismatches between the re-set dates on its Another potential risk arises because the cost pass- floating rate receivables and payables. This timing mis- through currency pool products have traditionally match does not have a material effect on income or on been funded with a large share of medium- and long- the equity-to-loans ratio. term fixed-rate debt, to provide the borrowers with a reasonably stable interest basis Given that the cumu- Exchange Rate Risk lative impact of interest rate changes over time has In order to minimize exchange rate risk in a multicur- resulted in a decline in the level of interest rates, the rency environment, IBRD matches its borrowing obli- cost of these histoncal fixed-rate borrowings in the gations in any one currency (after swap activities) with multicurrency pool and the single currency pools is assets in the same currency, as prescribed by the Arti- currently considerably higher than IBRD's new bor- cles In addition, IBRD's policy is to minimize the rowing costs. The amount of debt allocated to the exchange rate sensitivity of its equity-to-loans ratio. It multicurrency debt pool will exceed the balance of carries out this policy by undertaking currency conver- the multicurrency loan pool after FY 2010. The debt sions periodically to align the currency composition of which funds these loans have maturities that extend its equity to that of its outstanding loans This policy is beyond those of the loans and presents a risk of loss to designed to minimize the impact of market rate fluc- IBRD because this debt carries fixed interest rates. tuations on the equity-to-loans ratio, thereby preserv- Over-funding reaches a maximum of approximately ing IBRD's ability to better absorb potential losses $5 6 billion m FY 2015 Strategies for managing this from arrears regardless of the market environment. risk include changing the rate fLxity of the overfunded Figure 6 presents the currency composition of signifi- portion of the debt from fixed to floating rates beyond cant balance sheet components (net of swaps) at the 2010 through the use of forward startmg swaps. IBRD end of FY 2001 and FY 2000 has begun executing these swaps and to date has paid $44 million since FY 2000. These forward starting IBRD MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2001 25 Figure 6: Relative Currency Composition of Significant Balance Sheet Components At June 30, 2001 Others 2% 2% %;2% EUR 7% 2% E65% /f6o'- USD 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Assets Liabilities & Equity *Loans 82% EJ Borrowings &Other 80% El lnvestrwnts & Other 18% El Equity 20% 100% 100% At June 30, 2000 Others 2% 3% ipy Z;7~ 2% EUR 1% 2% USD61 1%§ . ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~12% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Assets Liabilities & Equity *Loans 83% El Borrowings&Other 81% Il nvestnients&Other 17% El Equity 19% 100% 100% 26 THE WORLD BANK ANNUAL REPORT 2001 Operating Risk has an on-going program in place to assess all major Operating risk is the potential for loss ansing from business units IBRD obtains an attestation report internal activities or external events caused by break- from its external auditors that IBRD's assertion that, downs in information, communication, physical safe- as of June 30 of each fiscal year, its system of intemal guards, business continuity, supervision, transaction control over its external financial reporting meets the processing, settlement systems and procedures and the criteria for effective internal control over external execution of legal, fiduciary and agency responsibili- financial reporting as described in COSO, is fairly ties. IBRD, like all financial institutions, is exposed to stated in all material respects many types of operating risks IBRD attempts to miti- Economic and Monetary Union in Europe gate operating risk by maintaining a system of internal controls that is designed to keep operating risk at Since January 1, 1999, in the normal course of busi- appropriate levels in view of the financial strength of ness as a multicurrency organization, IBRD has been IBRD and the characteristics of the activities and mar- conducting euro-denominated transactions in paying kets in which IBRD operates. In the past, IBRD has and receiving, investments, bond issuance, loan dis- suffered certain minor financial losses from operating bursements, loan billing and new lending commit- risk and while it maintains an adequate system of ments internal controls, there can be no absolute assurance IBRD has adopted a gradual approach to redenomi- that IBRD will not suffer such losses in the future nate national currency unit balance sheet items and IBRD uses the CoSoa control framework and a self- IBRD-administered donor trust funds to euro during assessment methodology to evaluate the effectiveness the transition period, before their automatic conver- of its internal controls over financial reporting, and it sion to euro on January 1, 2002 As of June 30, 2001, the accounting records for the a In 1992, the Committee of Sponsoring Orgamzations of investments and borrowings portfolios had been rede- the Treadway Commission (COSO) issued its Internal Con- nominated Records of the loans and capital portfolios trol-Integrated Framework, which provided a common defini- are in the process of being redenominated and will be tion of internal control and guidance on judging its completed by January 1, 2002 effectiveness IBRD MANAGEMENT'sDISCUSSIONANDANALYSIS.JUNE 30,2001 27 7. RESULTS OF OPERATIONS * The swing of $842 million in the provision for To a large extent, the income and expenses associated loan loss expense reflects a reassessment of the with IBRD's interest-bearing assets and liabilities are probable losses inherent in the accruing portfolio, affected by changes in the interest rate environment. and an increase m the volume of loans in nonac- crual status (See Notes to Financial Statements- Interest Rate Environment Note C). During FY 2001, the applicable interest rates (pre- * A $345 million increase in income related to FAS dominantly U.S. dollar interest rates) for IBRD were 133 adjustments reflects the mark to fair value of declining, while the rates were increasing during FY IBRD's derivative instruments, as defined by FAS 2000 The U.S dollar rates depicted in Figure 7 illus- 133, and the amortization of the transition trate these trends. adjustments created upon adoption of this stan- dard on July 1, 2000. Figure 7: LIBOR Interest Rates - U.S. Dollar FY 2000 versus FY 1999 7 5 - FY 2000i FY 2000 net income was $1,991 million, $473 million 6 5 higher than in FY 1999 The majority of this change _ 5 5 - - \ was due to the following: u 5 5 * A $412 million reduction in loan loss provision 4.5 expense resulting primarily from a reassessment of the possible losses inherent in the loan portfo- 3 5 - lo That assessment concluded that a general June Sep Dec. March June improvement in credit quality for certain large borrowers, as well as for the accrual portfolio as a Although market rates decreased significantly in the whole, warranted a $243 million reduction in the latter half of FY 2001, this decrease will only affect accumulated provision for loan losses The IBRD's interest-bearing assets and liabilities as they remaining $169 million decrease in expense is repnce Accordingly, though average market rates attributable to a reduction in the growth of the were lower for FY 2001 than FY 2000, average appli- loan portfolio. cable interest rates for IBRD's instruments were higher * A $345 million increase in loan interest income, net of funding costs, resulting from an increase in Net Income the average outstanding loan balance, especially in IBRD's net income can be seen as broadly comprising the higher-yielding special adjustment loans, as a spread on earning assets, plus the contribution of well as the improved net returns from the single equity, less provisions for loan losses and administra- currency pool loans Net returns from the single tive expenses Table 14 shows a breakdown of income, currency pool loans recovered because the higher net of funding costs U S dollar borrowing costs were not fully passed through to borrowers in FY 1999. The lower FY 2001 versus FY 2000 interest waivers and higher front-end fees in FY 2001 net income was $1,489 million, $502 mlllion effect for the full FY 2000 also contributed to the lower than in FY 2000 The majority of this change increase in net returns from the loan portfolio was due to the following Table 14: Net Income In millions of US dollars FY2001 FY2000 FY 1999 Loan interest income, net of funding costs Debt funded $ 509 $ 678 $ 387 Equity funded 1,871 1,771 1,717 Total loan interest income, net of funding costs 2,380 2,449 2,104 Other loan income 11 49 59 Loan loss provision (676) 166 (246) Investment income, net of funding costs 140 116 324 Net noninterest expense (711) (789) (723) Operating Income 1,144 1,991 1,518 FAS 133 Adjustments 345 - - Net Income-Reported Basis $1,489 $1,991 $1,518 28 THE WORLD BANK ANNUAL REPORT 2001 * A $208 million reduction in investment income, FAS 133 Adjustments net of funding costs, primarily as a result of the non-recurring $237 million gain realized in FY Income of $345 millon related to FAS 133 adjust- 1999 from the liquidation of the held-to-maturity ments reflected the adoption of this standard on portfolio July 1, 2000 and the year-to-date mark to fair value of IBRD's derivative instruments, as defined by FAS 133, Net Interest Income and the amortization of the transition adjustment cre- ated upon adoption (See Notes to Financial State- FY 2 00J versus FY 2 000 ments-Summary of Significant Accounting and Income from Loans Related Policies) * Income from loans decreased by $10 million to FY 2000 versus FY 1999 $8,143 million in FY 2001 Income was reduced Income from Loans by $80 million due to the increased interest waiver on old loans during FY 2001 Addition- * Loan interest income increased by $504 million ally, the effects of an increased proportion of non- to $8,153 million in FY 2000 due primanly to the accrual loans further reduced earnings by $28 higher average balance of loans outstanding dur- million ing the year This increased volume resulted in an * These factors are offset by higher returns on additional $354 mllion of net mcome Addition- loans, as well as a higher average outstanding loan ally, an increase in the average return from loans volume during FY 2001, which resulted in $78 contributed another $150 million to the increase million and $40 million increases in loan income, in income. This increase in the weighted average respectively return were mainly due to four factors (i) a higher average rate on the LIBOR-based loans in * The increased return was in part attributable to a rising interest rate environment, (ii) the full the higher proportion of loans in U.S dollars, year effect of the pass through of higher U S dol- which on average carned higher nominal rates lar borrowing costs funding single currency pool than those in other major currencies. While inter- loans, (iii) a larger proportion of the higher-yield- est rates declined sharply at the end of FY 2001, ing special adjustment loans during the year, and most of the effects of this decline will only impact (Iv) having lower interest waivers and higher loan returns gradually as the loans reprice front-end fees in effect for the full fiscal year Income from Investments Income from Investments * Investment income decreased by $49 million in * Investment income decreased by $95 million in FY 2001 to $1,540 million primarily due to the FY 2000 to $1,589 million pnmarily due to two decrease in the average outstanding investments factors. In FY 1999, a $237 million one-time gain balance, which resulted in a reduction of $197 was realized upon liquidation of the securities in million in income This effect is partially offset by the held-to-maturity portfolio This was partially a $148 million increase in income due to higher offset by $165 million increase in income from returns. The higher returns reflected the higher higher returns achieved in the increasing interest average interest rates of the liquid asset portfolio rate environment seen over the past year during FY 2001, as well as the higher mark-to- market gains resulting from a falling U S dollar Borrowig Expenses interest rate environment in the last months of FY * The cost of borrowing increased by $282 million 2001 to $7,128 million in FY 2000, due to higher aver- Borrowing Expenses age borrowings outstanding The matunty of higher-cost debt in FY 2000 just offset the * The cost of borrowing increased by $24 million to increase in borrowing costs resulting from interest $7,152 million in FY 2001. Higher average bor- rate resets on variable rate debt. rowing rates resulted in a $314 million increase in cost. This higher rate reflected the higher average Net Noninterest Expense interest rate environment experienced during The main components of net noninterest expense are most of FY 2001 compared to FY 2000, and the presented in Table 15. increased proportion of U S. dollar borrowings, which on average carried higher nominal rates FY 2001 versus FY 2000 This increase in cost was partially offset by a Net noninterest expense decreased by $78 million lower average borrowings balance, resulting in a Overall gross administrative expenses decreased by $290 million decrease in borrowing costs $55 million (see Notes to Fmancial Statements-Note H) due primarily to a decrease in the overall adminis- trative expense budget, along with a slightly larger share of the total costs incurred being allocated to IDA, based on an agreed-upon cost sharing formula IBRD MANAGEMENT'S DISCUSSIONANDANALYSIS JUNE 30,2001 29 which considers certain operational volume inmdcators. H) Net noniterest expense increased $66 million The remaming decrease in net noninterest resulted The major factor was that the contribution of income from an increase in miscellaneous income from pension and postretirement benefits dropped by $89 million, as a result of the decrease in the actuari- FY 2000 versus FY 1999 ally determined Staff Retirement Plan income Overall gross administrative expenses decreased by $33 million (see Notes to Financial Statements-Note Table 15: Net Noninterest Expense In millions of US dollars FY2001 FY2000 FY 1999 Gross Administrative Expenses Staff Costs $ 474 $ 489 $ 538 Consultant Fees 62 88 97 Operational Travel 77 92 94 Other Expenses 393 392 365 Total Gross Administrative Expenses 1,006 1,061 1,094 Less Contribution to Special Programs 147 126 129 Total Net Administrative Expenses 859 935 965 Contribution to Special Programs 147 126 129 Service Fee Revenues (146) (118) (116) Pension & Postretirement Benefit Income (148) (156) (245) Net Other Expense (Income) (1) 2 (10) Total Net Noninterest Expense $ 711 $ 789 $ 723 30 THE WORLD BANK ANNUAL REPORT 2001 GLOSSARY OF TERMS Asset-backed Securities: Asset-backed securities are Old Loans: Loans for which the invitation to negoti- instruments whose cash flow is based on the cash ate was issued prior to July 31, 1998. flows of a pool of underlying assets managed by a Options: Options are contracts that allow the holder trust of the option the right, but not the obligation, to pur- Cross-Currency Interest Rate Swaps: Cross-currency chase or sell a financial instrument at a specified price interest rate swaps are currency swaps where one set within a specified period of time from or to the seller of cash flows reflects a fixed rate of interest and the of the option The purchaser of an option pays a pre- other reflects a floating rate of interest. mium at the outset to the seller of the option, who then bears the risk of an unfavorable change in the Currency Swaps: Currency swaps are agreements price of the financial instrument underlying the between two parties to exchange cash flows denomi- opbton. nated in different currencies at one or more certain times in the future The cash flows are based on a pre- Repurchase and Resale Agreements and Securities determined formula reflecting rates of interest and an Loans: Repurchase agreements are contracts under exchange of principal which a party sells securities and simultaneously agrees to repurchase the same securities at a specified Equity-to-Loans Ratio: This ratlo IS the sum of usable future date at a fixed price. The reverse of this transac- capital plus the special and general reserves, cumula- tion is called a resale agreement A resale agreement tive translation adjustment (excluding amounts associ- inovsteprheofeciiswthaimt- ated with the FAS 133 adjustment) and the proposed neous agreement to sell back the same securities at a transfer from unallocated net income to general stat ricen a sed date securities ar c reserves divided by the sum of loans outstanding, the tracts under which securities are lent for a specified present value of guarantees, net of the accumulated pendeo time a edurice provision for loan losses. perod of bme at a fixed price Return on Equity: This return IS computed as net Forward Interest Rate Swaps: A forward interest rate swap is an agreement under which the cash flow income divided by the average equity balance during exchanges of the underlying interest rate swaps would the year begin to take effect from a specified date Risk-bearing Capacity: The ability to absorb nsks in the balance sheet while continuing normal operations Futures and Forwards: Futures and forward contracts wihuhangtclloclabeapa. are contracts for delivery of securities or money mar- ket instruments in which the seller agrees to make Short Sales: Short sales are sales of securities not held delivery at a specified future date of a specified instru- in the seller's portfolio at the time of the sale The ment at a specified price or yield. Futures contracts are seller must purchase the secunty at a later date and traded on U S and international regulated exchanges bears the risk that the market value of the security will move adversely between the time of the sale and the Government and Agency Obligations: These obliga- tiehescrymutbdlvrd tions include marketable bonds, notes and other obli- gations issued by governments. Statutory Lending Limit Under IBRD's Articles of Agreement, as applied, the total amount outstanding Interest Rate Swaps: Interest rate swaps are agree- of loans, participations in loans, and callable guaran- ments involving the exchange of penlodic interest pay- tees may not exceed the sum of subscribed capital, ments of differing character, based on an underlying rees and surpu su notional principal amount for a specified time reserves an surplus Swaptions: A swaption is an option that gives the holder the right to enter into an interest rate or cur- Maintenance of Value: Agreements with members rency swap at a certain future date provide for the maintenance of the value, from the Time Deposits: Time deposits include certificates of time of subscription, of certain restricted currencies. deposit, bankers acceptances, and other obligations Additional payments to (or from) IBRD are required issued or unconditionally guaranteed by banks and in the event the par value of the currency is reduced other financial institutions. (or increased) to a significant extent, in the opinion of IBRD. Net Disbursements: Loan disbursements net of repayments and prepayments. New Loans: Loans for which the invitation to negoti- ate was issued on or after July 31, 1998 IBRDMANAGEMENT'SDISCUSSIONANDANALYSIS JUNE30, 2001 31 32 THE WORLD BANK ANNUAIL REPORT 2001 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT FINANCIAL STATEMENTS JUNE 30, 2001 Balance Sheet 34 Statement of Income 36 Statement of Comprehensive Income 3 7 Statement of Changes in Retained Earnings 3 7 Statement of Cash Flows 38 Summary Statement of Loans 40 Statement of Subscriptions to Capital Stock and Voting Power 43 Notes to Financial Statements 4 7 Report of Independent Accountants 73 33 BALANCE SHEET June 30, 2001 and June 30, 2000 Expressed in millions of US dollars 2001 2000 Assets Due from Banks Unrestricted currencies $ 50 $ 32 Currencies subject to restrictions-Note A 635 659 685 691 Investments-Trading (including securities transferred under repurchase or security lending agreements of $206 milion-June 30, 2001)- Notes B and F 24,168 24,941 Securities Purchased Under Resale Agreements-Note B 322 101 Nonnegotiable, Noninterest-bearing Demand Obligations on Account of Subscribed Capital 1,838 1,670 Amounts Receivable from Currency and Interest Rate Swaps Investments-Notes B and F 11,043 11,317 Borrowings (including an increase of $2,032 million due to FAS 133-June 30, 2001)-Notes D and F 63,326 67,231 Other Asset/Liability (including an increase of $2 million due to FAS 133- June 30, 2001)-Notes E and F 728 75,097 78,548 Amounts Receivable to Maintain Value of Currency Holdings on Account of Subscribed Capital 197 432 Other Receivables Amounts receivable from investment securities traded 508 189 Accrued income on loans 2,036 2,196 2,544 2,385 Loans Outstanding (see Summary Statement of Loans, Notes C and F) Total loans 156,800 164,858 Less undisbursed balance 37,934 44,754 Loans outstanding 118,866 120,104 Less Accumulated provision for loan losses 3,959 3,400 Deferred loan income 500 460 Net loans outstanding 114,407 116,244 Other Assets Unamortized issuance costs of borrowings 489 608 Miscellaneous-Note J 3,094 2,919 3,583 3,527 Total assets $222,841 $228,539 34 THE WORLD BANK ANNUAIL REPORT 2001 2001 2000 Liabilities Borrowings-Notes D and F Short-term $ 6,918 $ 4,730 Medium- and long-term (including an increase of $45 million due to FAS 133-June 30, 2001) 99,839 105,649 106,757 110,379 Securities Sold Under Repurchase Agreements and Payable for Cash CoUateral Received-Note B 207 Amounts Payable for Currency and Interest Rate Swaps Investments-Notes B and F 10,791 11,720 Borrowings (including an increase of $1,362 million due to FAS 133-June 30,2001)-Notes D and F 68,051 70,864 Other Asset/Liability-Notes E and F 701 79,543 82,584 Amounts Payable to Maintain Value of Currency Holdings on Account of Subscribed Capital 8 56 Other Liabilities Amounts payable for investment securities purchased 686 529 Accrued charges on borrowings 3,232 3,312 Payable for Board of Governors-approved transfers-Note G 1,093 861 Liabilities under other postretirement benefits plans-Note J 129 119 Accounts payable and miscellaneous liabilities 1,616 1,410 6,756 6,231 Total liabilities 193,271 199,250 Equity Capital Stock (see Statement of Subscriptions to Capital Stock and Voting Power, Note A) Authorized capital (1,581,724 shares-June 30, 2001 and June 30, 2000) Subscnbed capital (1,570,895 shares-June 30, 2001; 1,563,443 shares-June 30, 2000) 189,505 188,606 Less uncalled portion of subscriptions 178,029 177,188 11,476 11,418 Amounts to Maintain Value of Currency Holdings-Note A (912) (522) Payments on Account of Pending Subscriptions-Note A - 7 Retained Earnings (see Statement of Changes in Retained Earnings, Note G) 19,851 19,027 Accumulated Other Comprehensive Loss-Note L (845) (641) Total equity 29,570 29,289 Total liabilities and equity $222,841 $228,539 The Notes to Financial Statements are an integral part of these Statements. IBRDFINANCIALSTATEMENTs:JUNE30,2001 35 STATEMENT OF INCOME For the fiscal years ended June 30, 2001, June 30, 2000 and June 30, 1999 Expressed in millions of US dollars 2001 2000 1999 Income Income from loans-Note C Interest $ 8,052 $ 8,041 $7,535 Commitment charges 91 112 114 Income from investments-Note B Trading Interest 1,476 1,575 1,425 Net gains (losses) Realized (10) 3 1 Unrealized 51 3 (5) Held-to-maturity Interest - - 47 Realized gams - - 237 Income from securities purchased under resale agreements-Note B 29 12 15 Income from Staff Retirement Plan-Note J 155 166 255 Other income-Notes H and I 171 133 134 Total income 10,015 10,045 9,758 Expenses Borrowing expenses-Note D Interest 6,988 6,978 6,703 Prepayment losses 33 1 1 Amortization of issuance and other borrowing costs 131 149 142 Interest on securities sold under repurchase agreements and payable for cash collateral received-Note B 6 4 36 Administrative expenses-Notes H and 1 859 935 965 Contributions to special programs-Note H 147 126 129 Other postretirement benefits expense-Note J 7 10 10 Provision for loan losses-Note C 676 (166) 246 Other expenses 24 17 8 Total expenses 8,871 8,054 8,240 Operating Income 1,144 1,991 1,518 FAS 133 adjustment 126 - - Income before cumulative effect of change in accounting principle 1,270 1,991 1,518 Cumulative effect of change in accounting principle 219 - - Net Income $ 1,489 $ 1,991 $1,518 The Notes to Financial Statements are an integral part of these Statements. 36 THE WORLD BANK ANNUAL REPORT 2001 STATEMENT OF COMPREHENSIVE INCOME For the fiscal years ended June 30, 2001, June 30, 2000 and June 30, 1999 Expressed in millions of US. dollars 2001 2000 1999 Net income $1,489 $1,991 $1,518 Other comprehensive income-Note L Cumulative effect of change in accounting principle 500 - Reclassification of FAS 133 transition adjustment to net income (169) - Currency translation adjustments (535) (4) 323 Total other comprehensive income (loss) (204) (4) 323 Comprehensive income $1,285 $1,987 $1,841 STATEMENT OF CHANGES IN RETAINED EARNINGS For the fiscal years ended June 30, 2001, June 30, 2000 and June 30, 1999 Expressed In millions of US dollars 2001 2000 1999 Retained earnings at beginning of the fiscal year $19,027 $17,709 $16,733 Board of Governors-approved transfers to-Note G International Development Association (320) (348) (352) Trust Fund for Gaza and West Bank - - (60) (90) Trust Fund for East Timor - (10) Heavily Indebted Poor Countries Debt Initiative Trust Fund (250) (200) (100) Capacity building in Africa (30) (30) Trust Fund for Kosovo (35) (25) Trust Fund for Federal Repubhc of Yugoslavia (30) - Net income for the fiscal year 1,489 1,991 1,518 Retained earnings at end of the fiscal year $19,851 $19,027 $17,709 The Notes to Financial Statements are an integral part of these Statements. IBRD FINANCIAL STATEMENTS JUNE30,2001 37 STATEMENT OF CASH FLOWS For the fiscal years ended June 30, 2001, June 30, 2000 and June 30, ]999 Expressed in millions of US dollars 2001 2000 1999 Cash flows from lending and investing activities Loans Disbursements $(11,707) $(13,222) $(18,100) Principal repayments 9,623 9,973 9,988 Principal prepayments 70 499 94 Loan ongination fees received 1 19 32 Investments Held-to-maturity Purchases of securities and repayments of secunties sold under repurchase agreements - - (13,266) Matunties of securities and proceeds from securities sold under repurchase agreements - - 13,426 Proceeds from sale of held-to-maturity portfolio net of securities sold under repurchase agreements - - 1,389 Net cash used in lending and investing activities (2,013) (2,731) (6,437) Cash flows from Board of Governors-approved transfers to International Development Association (20) (50) Debt Reduction Facility for IDA-Only Countries 3 (19) - Trust Fund for Gaza and West Bank (17) (83) (62) Heavily Indebted Poor Countries Debt Initiative Trust Fund (250) (200) - Trust Fund for East Timor, Trust Fund for Kosovo, Trust Fund for Fed- eral Republic of Yugoslavia, and capacity building in Afnca (95) (65) - Net cash used in Board of Governors-approved transfers (379) (417) (62) Cash flows from financing activities Medium- and long-term borrowings New issues 17,223 15,206 21,846 Retirements (18,027) (19,211) (10,034) Net short-term borrowings 1,870 (917) (1,512) Net currency and mterest rate swaps-Borrowings (1,402) (454) (340) Net capital stock transactions 72 154 175 Net cash (used in) provided by financing activities (264) (5,222) 10,135 Cash flows from operating activities Net income 1,489 1,991 1,518 Adjustments to reconcile net income to net cash provided by operating activities FAS 133 adjustment (126) - - Cumulative effect of change in accounting principle (219) - - Depreciation and amortization 979 884 819 Amortization of deferred loan income (49) (30) (20) Provision for loan losses 676 (166) 246 Income from Staff Retirement Plan (155) (166) (255) Gain on sale of held-to-maturity portfolio - - (237) Changes in other assets and liabilities Decrease (increase) in accrued income on loans and held-to- maturity investments 138 (99) (46) Decrease (increase) in miscellaneous assets 82 (269) (130) (Decrease) increase in accrued charges on borrowings (49) 322 470 Increase (decrease) in accounts payable and miscellaneous liabili- ties 54 135 (258) Net cash provided by operating activities 2,820 2,602 2,107 38 THE WORLD BANK ANNUAL REPORT 2001 2001 2000 1999 Effect on liquid investments due to decrease in net assets associated with other postretirement benefits $ - $ - $ 650 Effect of exchange rate changes on unrestricted cash and liquid invest- ments (88) (23) 224 Net increase (decrease) in unrestricted cash and liquid investments 76 (5,791) 6,617 Unrestricted cash and liquid investments at beginning of the fiscal year 24,331 30,122 23,505 Unrestricted cash and hquid investments at end of the fiscal year $24,407 $24,331 $ 30J22 Composition of unrestricted cash and liquid investments Investments held in trading portfolio $24,168 $24,941 $ 30,345 Unrestricted currencies 50 32 33 Net (payable) receivable for investment securities traded/purchased-Trading (178) (340) (79) Net receivable (payable) from currency and interest rate swaps- Investments 252 (403) (81) Net receivable (payable) for securities purchased/sold under resale/ repurchase agreements and payable for cash collateral received 115 101 (96) $24,407 $24,331 $ 30,122 Supplemental disclosure Increase (decrease) in ending balances resulting from exchange rate fluctuations Loans outstanding $(3,329) $ 16 $ 2,519 Investments-Held-to-maturity - - 13 Borrowings (5,530) (1,173) 1,010 Currency and interest rate swaps-Borrowings 3,164 1,195 1,244 Capitalized loan origination fees included in total loans 77 110 115 The Notes to Financial Statements are an integral part of these Statements. IBRDFINANCIALSTATEMENTS JUNE30,2001 39 SUMMARY STATEMENT OF LOANS June 30, 2001 Expressed in millions of US dollars Loans approved Undisbursed Percentage but not yet balance of Loans of total loans Borrower or guarantor Total loans effective I effective loans2 outstanding outstanding Algeria $ 1,883 $ 42 $ 460 $ 1,381 1 16% Argentina 11,102 446 1,992 8,664 7 29 Armenia 8 - - 8 0 01 Bahamas, The 2 - 2 * Bangladesh 20 - - 20 0.02 Barbados 29 15 2 12 0 01 Belarus 125 23 7 95 0.08 Belize 55 1 12 42 0.03 Bosnia and Herzegovina 548 - - 548 0 46 Botswana 12 - - 12 0 01 Brazil 11,047 476 2,359 8,212 6 91 Bulgaria 1,012 77 150 785 0.66 Cameroon 243 53 - 190 0 16 Chad 40 40 - - Chile 904 - 136 768 0.65 China 19,059 706 7,112 11,241 9 46 Colombia 2,537 185 503 1,849 1 56 Congo, Democratic Republic of 80 - - 80 0 07 Congo, Republic of 42 - - 42 0 03 Costa Rica 152 - 38 114 0 10 C6te d'Ivoire 526 - - 526 0 44 Croatia 602 5 217 380 0.32 Cyprus 30 - - 30 0 02 Czech Republic 224 - - 224 0 19 Dominica 7 - 4 3 * Dominican Republic 464 33 123 308 0 26 Ecuador 1,124 32 189 903 0.76 Egypt, Arab Republic of 895 - 314 581 0.49 El Salvador 502 - 187 315 0 26 Estonia 84 - 21 63 0 05 Fiji 17 - - 17 0.01 Gabon 68 - 8 60 0 05 Ghana 6 - - 6 0.01 Grcnada 9 - 6 3 * Guatemala 568 82 179 307 0 26 Guyana 6 - - 6 0.01 Honduras 139 - - 139 0 12 Hungary 591 - 18 573 0 48 India 11,288 1,474 2,899 6,915 5 82 Indonesia 13,359 284 1,477 11,598 9.76 Iran, Islamic Republic of 756 - 283 473 0.40 Iraq 35 - - 35 003 Jamaica 418 - 28 390 0 33 Jordan 1,064 - 171 893 0 75 Kazakhstan 1,669 65 567 1,037 0.87 40 THE WORLD BANK ANNUAL REPORT 2001 Loans approved Undisbursed Percentage but not yet balance of Loans of total loans Borrower or guarantor Total loans effecive I effective loans2 outstanding outstanding Kenya $ 33 $ - $ - $ 33 003% Korea, Republic of 7,973 - 55 7,918 6 66 Latvia 312 37 42 233 0.20 Lebanon 645 20 375 250 0 21 Lesotho 88 - 32 56 0 05 Liberia 122 - - 122 0.10 Lithuania 382 - 128 254 0 21 Macedonia, former Yugoslav Republic of 204 16 76 112 0.09 Malawi 5 - - 5 * Malaysia 1,001 - 219 782 0 66 Mauritius 91 - 14 77 0 06 Mexico 14,660 1,480 1,945 11,235 9 45 Moldova 197 - 13 184 0 15 Morocco 2,994 100 285 2,609 2 20 Nicaragua 2 - - 2 * Nigeria 1,455 - 16 1,439 1.21 Oman 2 - - 2 * Paklstan 3,032 - 127 2,905 2.44 Panama 421 83 60 278 0.23 Papua New Guinea 343 - 114 229 0.19 Paraguay 292 - 91 201 0 17 Peru 2,851 177 110 2,564 2 16 Philippines 4,274 60 842 3,372 2 84 Poland 2,746 145 514 2,087 1 76 Romania 2,518 130 526 1,862 1 57 Russian Federation 8,452 457 1,294 6,701 5.64 St. Kitts and Nevis 12 - 7 5 * St Lucia 13 - 7 6 * St. Vincent and the Grenadines 2 - 2 * * Seychelles 3 - - 3 * Slovak Republic 164 - - 164 0.14 Slovenia 95 - 17 78 0 07 South Afnca 24 - 19 5 * Sri Lanka 10 - - 10 0 01 Swaziland 29 - 20 9 0 01 Syrian Arab Republic 18 - - 18 0.02 Tanzania 9 - - 9 0.01 Thailand 3,520 - 588 2,932 2.47 Trinidad and Tobago 124 - 34 90 0 08 Tunisia 1,745 73 496 1,176 0.99 IBRD FINANCIALSTATEMENTS JUNE30,2001 41 SUMMARY STATEMENT OF LOANS (Continued) June 30, 2001 Expressed zn millions of US. dollars Loans approved Undzsbursed Percentage but not yet balance of Loans of total loans Borrower or guarantor Total loans effective I effectve loans2 outstanding outstanding Turkey $ 6,133 $ - $ 2,542 $ 3,591 3 02% Turkmenistan 65 - 36 29 0 02 Ukraine 2,343 53 281 2,009 1.69 Uruguay 738 33 159 546 0 46 Uzbekistan 405 - 184 221 0 19 Venezuela Reptiblica Bolivariana de 1 205 30 268 907 0 76 Yugoslavia Federal Republic of I 0166 - - 1,066 0 90 Zambia 2-4 - - 24 0 02 Zimbabwe 396 - 1 395 0 33 Subtotal4 156,589 6;933 31,001 118,655 99 83 CaribbeanDevelopmentBank3 5 - - 5 International Finance Corporation 206 - - 206 0.17 Total-June 30, 20014 $156,800 $6,933 $31,001 $118,866 100.00% Total-June 30, 2000 $164,858 $5,760 $38,994 $120,104 *Indicates amount less than $0 5 million or less than 0 005 percent NOTES I Loans totaling $5,475 million ($4,754 millton-June 30, 2000) have been approved by IBRD, but the related agreements have not been signed Loan agreements totaling $1,458 mllhion ($1,006 million-June 30, 2000) have been signed, but the loans do not become effective and disburse- ments thereunder do not start until the borrowers and guarantors, if any, take certain actions and furnish certain documents to IBRD 2 Of the undisbursed balance, IBRD has entered into irrevocable commitments to disburse $1,018 million ($1,165 million-June 30, 2000) 3 These loans are for the benefit of The Bahamas, Barbados, Grenada, Guyana, Jamaica, Tnnidad and Tobago, and terntones of the United King- dom (Associated States and Dependencies) in the Canbbean Region, that are severally lIable as guarantors to the extent of subloans made in their terntories 4 May differ from the sum of individual figures shown due to rounding The Notes to Financial Statements are an integral part of these Statements. 42 THE WORLD BANK ANNUAL REPORT 2001 STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER June 30, 2001 Expressed in millions of US dollars Subscrnptions Voting Power Percentage Amounts Number Percentage of Total Amounts subject of of Member Shares total amounts paid in] to call1'2 votes total Afghanistan 300 002% $ 362 $ 3 6 $ 32 6 550 003% Albania 830 0 05 100 1 3 6 96 5 1,080 0 07 Algeria 9,252 0 59 1,116 1 67 1 1,049 0 9,502 0 59 Angola 2,676 0 17 322 8 17 5 305 4 2,926 0 18 Antigua and Barbuda 520 003 62 7 1 3 61 5 770 005 Argentina 17,911 1 14 2,160 7 1322 2,0284 18,161 1 12 Armenia 1,139 007 1374 59 1315 1,389 009 Australia 24,464 1 56 2,951 2 181 8 2,769 5 24,714 1 53 Austria 11,063 0 70 1,334 6 80 7 1,253 9 11,313 0 70 Azerbaijan 1,646 0 10 198 6 9 7 188 8 1,896 0 12 Bahamas, The 1,071 007 1292 54 123 8 1,321 008 Bahrain 1,103 007 1331 57 1274 1,353 008 Bangladesh 4,854 031 5856 33 9 5516 5,104 032 Barbados 948 006 1144 45 1099 1,198 007 Belarus 3,323 0 21 400 9 22 3 378 5 3,573 0 22 Belgium 28,983 1 84 3,496 4 215 8 3,280 6 29,233 1 81 Belize 586 0 04 70 7 1 8 68 9 836 005 Benin 868 006 1047 39 1008 1,118 007 Bhutan 479 003 57 8 1 0 56 8 729 005 Bolivia 1,785 011 2153 108 2045 2,035 013 Bosnia and Herzegovina 549 0 03 66 2 5 8 60 4 799 005 Botswana 615 0 04 74.2 2 0 72 2 865 0 05 Brazil 33,287 2 12 4,015 6 245 5 3,770 1 33,537 2 07 Brunei Darussalam 2,373 0 15 2863 15 2 271 1 2,623 0 16 Bulgaria 5,215 0 33 629 1 36 5 592 6 5,465 0 34 Burkina Faso 868 006 1047 39 1008 1,118 007 Burundi 716 0 05 86 4 3 0 83 4 966 0 06 Cambodia 214 0 01 25 8 2 6 23 2 464 0 03 Cameroon 1,527 010 1842 90 1752 1,777 (011 Canada 44,795 2 85 5,403 8 334 9 5,068 9 45,045 2 79 Cape Verde 508 0 03 61 3 1 2 60 1 758 0 05 Central African Republic 862 0 05 104 0 3 9 100 1 1,112 0 07 Chad 862 005 1040 39 100 1 1,112 007 Chile 6,931 0 44 836 1 49 6 786 6 7,181 0 44 China 44,799 2 85 5,404 3 335 0 5,069 3 45,049 2 79 Colombia 6,352 040 7663 452 721 1 6,602 041 Comoros 282 0 02 34 0 0 3 33 7 532 003 Congo, Democratic Republic of 2,643 0 17 318 8 25 4 293 5 2,893 0 18 Congo,Republicof 927 006 1118 43 1075 1,177 007 Costa Rica 233 0 01 28 1 1 9 26 2 483 0 03 C6te d'lvoire 2,516 0 16 303 5 164 287 1 2,766 0 17 Croatia 2,293 0 15 276 6 17 3 259 3 2,543 0 16 Cyprus 1,461 009 1762 84 1679 1,711 011 Czech Republic 6,308 040 761 0 459 7150 6,558 041 Denmark 13,451 0 86 1,622 7 97 8 1,524 9 13,701 0 85 Djibouti 559 0 04 67 4 1 6 65 9 809 005 Dominica 504 0 03 60 8 1 1 59 7 754 0 05 Dominican Republic 2,092 0 13 252 4 13 1 239 3 2,342 0 14 Ecuador 2,771 0 18 3343 182 316 1 3,021 0 19 Egypt, Arab Republic of 7,108 0 45 857 5 509 806 6 7,358 0 46 IBRD FINANCIAL STATEMENTS JUNE 30, 2001 43 STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (Continued) June 30, 2001 Expressed in millions of US dollars Subscriptions Voting Power Percentage Amounts Number Percentage of Total Amounts subject of of Member Shares total amounts paid tn1 to calll'2 votes total El Salvador 141 0.01% $ 17 0 $ 1 7 $ 15 3 391 0 02% Equatorial Guinea 715 005 863 27 835 965 006 Eritrea 593 0 04 71 5 1.8 69 7 843 005 Estonia 923 006 1113 43 107 1 1,173 007 Ethiopia 978 0 06 118 0 4.7 113 3 1,228 0 08 Fiji 987 0 06 1191 4 8 114 3 1,237 0 08 Finland 8,560 0 54 1,032 6 61 9 970 8 8,810 0 54 France 69,397 4 42 8,371 7 520 4 7,851 3 69,647 4 31 Gabon 987 0 06 1191 5 1 113 9 1,237 0 08 Gambia, The 543 003 65 5 1 5 64 0 793 005 Georgia 1,584 0 10 191 1 93 181 8 1,834 0.11 Germany 72,399 4 61 8,733 9 542 9 8,190 9 72,649 4 49 Ghana 1,525 0.10 184 0 12 7 1712 1,775 0 11 Greece 1,684 0 11 203 1 14 1 189 1 1,934 0 12 Grenada 531 0 03 64 1 14 62 7 781 0 05 Guatemala 2,001 013 2414 124 229 0 2,251 0 14 Guinea 1,292 0 08 155 9 71 148 8 1,542 010 Guinea-Bissau 540 0 03 65 1 1 4 63 7 790 0 05 Guyana 1,058 0 07 127 6 53 122 3 1,308 0 08 Haiti 1,067 007 1287 54 1233 1,317 008 Honduras 641 0 04 77 3 2 3 75 0 891 006 Hungary 8,050 051 971 1 580 913 1 8,300 051 Iceland 1,258 0 08 151 8 68 144 9 1,508 0 09 India 44,795 2 85 5,403 8 333 7 5,070 1 45,045 2 79 Indonesia 14,981 095 1,8072 1103 1,6970 15,231 094 Iran, Islamic Republic of 23,686 1 51 2,857 4 175 8 2,681 5 23,936 1 48 Iraq 2,808 018 338 7 27 1 3116 3,058 0 19 Ireland 5,271 0 34 635 9 37 1 598 8 5,521 0 34 Israel 4,750 0 30 573 0 33 2 539 8 5,000 031 Italy 44,795 2 85 5,403 8 334 8 5,069 0 45,045 2 79 Jamaica 2,578 016 311.0 168 2942 2,828 017 Japan 127,000 8 08 15,320 6 944 0 14,376 7 127,250 7 87 Jordan 1,388 0 09 167 4 7 8 159 6 1,638 010 Kazakhstan 2,985 0 19 360 1 19 8 340 3 3,235 0 20 Kenya 2,461 016 2969 159 2810 2,711 017 Kiribati 465 003 561 09 552 715 004 Korea, Republic of 15,817 1 01 1,9081 1145 1,7935 16,067 099 Kuwait 13,280 085 1,602 0 974 1,504 6 13,530 084 Kyrgyz Republic 1,107 007 133 5 57 1279 1,357 008 Lao People's Democratic Republic 178 001 215 15 200 428 003 Latvia 1,384 0 09 167 0 78 159 2 1,634 010 Lebanon 340 002 410 11 399 590 004 Lesotho 663 0 04 80 0 2 3 77 6 913 0 06 Liberia 463 003 559 26 533 713 004 Libya 7,840 0 50 945 8 57 0 888 8 8,090 0 50 Lithuania 1,507 0 10 1818 8 7 173 1 1,757 0 11 Luxembourg 1,652 011 1993 98 1895 1,902 012 Macedonia, former Yugoslav Republic of 427 0 03 51 5 3 2 48 3 677 0 04 Madagascar 1,422 0 09 171 5 81 163 5 1,672 0 10 Malawi 1,094 007 1320 56 1264 1,344 008 44 THE WORLD BANK ANNUAL REPORT 2001 Subscnptions Voting Power Percentage Amounts Number Percentage of Total Amounts subject of of Member Shares total amounts paid in1 to call1'2 votes total Malaysia 8,244 0 52°A, $ 994 5 $ 59 5 $ 935 0 8,494 0 53% Maldives 469 0 03 56 6 0 9 55 7 719 0 04 Mall 1,162 007 1402 61 134 1 1,412 009 Malta 1,074 007 129 6 5 4 124 1 1,324 008 Marshall Islands 469 0 03 56 6 0 9 55 7 719 0 04 Mauritania 900 006 1086 41 1044 1,150 007 Mauritius 1,242 0 08 149 8 6 7 143 1 1,492 009 Mexico 18,804 1 20 2,268 4 1390 2,129 4 19,054 1 18 Micronesia, Federated States of 479 0 03 57 8 1 0 56 8 729 005 Moldova 1,368 009 1650 76 1574 1,618 0 10 Mongolia 466 003 562 23 539 716 004 Morocco 4,973 032 5999 348 565 1 5,223 032 Mozambique 930 0 06 112 2 4 8 107 4 1,180 0 07 Myanmar 2,484 0 16 299 7 16 1 283 6 2,734 0 17 Namibia 1,523 010 1837 88 1749 1,773 011 Nepal 968 006 1168 46 1121 1,218 008 Netherlands 35,503 2 26 4,282 9 264 8 4,018 1 35,753 2 21 New Zealand 7,236 0 46 872 9 51 9 821 0 7,486 046 Nicaragua 608 0 04 73 3 2 1 71 3 858 0 05 Niger 852 0 05 102 8 3 8 99 0 1,102 0 07 Nigeria 12,655 0 81 1,526 6 92 7 1,433 9 12,905 0 80 Norway 9,982 0 64 1,204 2 72 6 1,131 6 10,232 063 Oman 1,561 010 1883 91 1792 1,811 011 Pakistan 9,339 0 59 1,126 6 67 8 1,058 9 9,589 0 59 Palau 16 * 19 02 1 8 266 002 Panama 385 002 464 3 2 43 2 635 004 Papua New Guinea 1,294 0 08 156 1 7 1 149 0 1,544 0 10 Paraguay 1,229 008 1483 66 1416 1,479 009 Peru 5,331 0 34 643 1 37 5 605 6 5,581 0 35 Philippines 6,844 0 44 825 6 48 9 776 7 7,094 0 44 Poland 10,908 069 1,3159 796 1,2363 11,158 069 Portugal 5,460 0 35 658 7 38 5 620 2 5,710 0 35 Qatar 1,096 007 1322 90 1233 1,346 008 Romania 4,011 0 26 483 9 30 5 453 4 4,261 0 26 Russian Federation 44,795 2 85 5,403 8 333 9 5,070 0 45,045 2 79 Rwanda 1,046 007 1262 52 1209 1,296 008 St Kitts and Nevis 275 0 02 33 2 03 32 9 525 0 03 St Lucia 552 004 666 1 5 65 1 802 005 St Vincent and the Grenadines 278 0 02 33 5 0 3 33 2 528 003 Samoa 531 0 03 64 1 1 4 62 7 781 0 05 San Marino 595 0 04 71 8 2 5 69 3 845 0 05 Sao Tome and Principe 495 003 59 7 1 1 58 6 745 005 Saudi Arabia 44,795 2 85 5,403 8 335 0 5,068 9 45,045 2 79 Senegal 2,072 0 13 2500 13 0 237 0 2,322 0 14 Seychelles 263 002 317 02 31 6 513 003 Sierra Leone 718 005 866 30 836 968 006 Singapore 320 0 02 386 3 9 34 7 570 004 Slovak Republic 3,216 0 20 388 0 23 0 365 0 3,466 0 21 Slovenia 1,261 008 152.1 95 1426 1,511 009 Solomon Islands 513 0 03 61 9 1 2 60 7 763 0 05 IBRD FINANCIAL STATEMENTS JUNE 30, 2001 45 STATEMENT OF SUBSCRIPTIONS TO CAPITAL STOCK AND VOTING POWER (Continued) June 30, 2001 Expressed in millions of US dollars Subscnptions Voting Power Percentage Amounts Number Percentage of Total Amounts subject of of Member Shares total amounts paid inI to call1'2 votes total Somalia 552 0 04% $ 66 6 $ 3 3 $ 63 3 802 0 05% South Afnca 13,462 0 86 1,624 0 98 8 1,525 2 13,712 0 85 Spain 27,997 1 78 3,3774 2068 3,1706 28,247 1 75 Sri Lanka 3,817 0 24 460 5 26 1 434 3 4,067 0 25 Sudan 850 0 05 102 5 7 2 95 3 1,100 0 07 Suriname 412 003 497 20 477 662 004 Swaziland 440 003 53 1 20 51 1 690 004 Sweden 14,974 0 95 1,806 4 110 2 1,696 2 15,224 0 94 Switzerland 26,606 1 69 3,209 6 197 2 3,012 4 26,856 1 66 Syrian Arab Republic 2,202 0 14 265 6 14 0 251 7 2,452 0 15 Tajikistan 1,060 0 07 127 9 5 3 122 5 1,310 0 08 Tanzania 1,295 0 08 156 2 10 0 146 2 1,545 0 10 Thailand 6,349 0 40 765 9 45 2 720 7 6,599 0 41 Togo 1,105 007 1333 57 1276 1,355 008 Tonga 494 003 596 1 1 58 5 744 005 Tnnidad and Tobago 2,664 0 17 321 4 17 6 303 7 2,914 0 18 Tunisia 719 005 867 57 81 1 969 006 Turkey 8,328 0 53 1,004 6 59 8 944 8 8,578 0 53 Turkmenistan 526 0 03 63 5 2 9 60 5 776 0 05 Uganda 617 0 04 74 4 4 4 70 1 867 0 05 Ukraine 10,908 069 1,3159 793 1,2366 11,158 069 United Arab Emirates 2,385 0 15 287 7 22 6 265 1 2,635 0 16 United Kingdom 69,397 4 42 8,371 7 539 5 7,832 2 69,647 4 31 United States 264,969 16 87 31,964 5 1,998.4 29,966 2 265,219 16 41 Uruguay 2,812 018 339 2 18 6 320 7 3,062 019 Uzbekistan 2,493 016 300 7 161 284 7 2,743 017 Vanuatu 586 0 04 70 7 18 68 9 836 0 05 Venezuela, Reptiblica Bolivariana de 20,361 1 30 2,456 2 1508 2,3055 20,611 127 Vietnam 968 006 1168 81 1087 1,218 008 Yemen, Republic of 2,212 0 14 266 8 140 252 8 2,462 0 15 Yugoslavia, FederalRepublhcof 1,597 010 1927 169 1757 1,847 011 Zambia 2,810 018 3390 200 3190 3,060 019 Zimbabwe 3,325 0 21 401 1 224 378 7 3,575 0 22 Total-June 30, 20012 1,570,895 10000% $189,505 $11,476 $178,029 1,616,645 10000% Total-June 30, 2000 1,563,443 100 00% $188,606 $ 1,418 $177,188 1,608,693 * Indicates amounts less than 0 005 percent NOTES I See Notes to Financial Statements-Note A 2 May differfrom the sum of indvtidual figures shown due to rounding The Notes to Financial Statements are an integral pan of these Statements. 46 THE WORLD BANK ANNUAL REPORT 2001 NOTES TO FINANCIAL STATEMENTS PURPOSE AND AFFILIATED ORGANIZATIONS with its amendments In addition, IBRD adopted Inter- The International Bank for Reconstruction and Devel- national Accounting Standard (lAS) 39, "Financial opment (IBRD) is an international organization which Instruments Recognition and Measurement" commenced operations in 1946 The pnncipal purpose Although adoption of IAS 39 is not required for IBRD of IBRD is to promote sustainable economic develop- until July 1, 2001, IBRD elected to adopt this standard ment and reduce poverty in its member countries, pri- concurrently with SFAS No 133 These standards are manly by providing loans and related technical collectively referred to as FAS 133 in this document maiyb provdn lon n read tehia These standards require that derivative instruments, as assistance for specific projects and for programs of eco- s nomic reform in developing member countries The defined by FAS 133, be recorded on the balance sheet activities of IBRD are complemented by those of three and reported at fair value affiliated organizations, the International Development IBRD uses derivative instruments in its investments and Association (IDA), the International Finance Corpora- borrowings portfolios and for asset/liability manage- tion (IFC), and the Multilateral Investment Guarantee ment purposes In applying FAS 133 for purposes of Agency (MIGA) Each of these organizations is legally financial statement reporting, IBRD has elected not to and financially independent from IBRD, with separate define any qualifying hedging relationships Rather, all assets and liabilities, and IBRD is not liable for their denvative instruments, as defined by FAS 133, have respective obligations IDA's main goal is to reduce pov- been marked to fair value and all changes in the fair erty through promoting economic development in the value have been recognized in net income While the less developed areas of the world included in IDA's denvatives in the borrowings portfolio require an membership by providing financing on concessionary adjustment under FAS 133, as do the Other Asset/Lia- terms IFC's purpose is to encourage the growth of pro- bility swaps, no adjustment is required to the invest- ductive private enterprises in its member countries ments portfolio since those derivative instruments are through loans and equity investments in such enter- already recorded at fair value as part of the trading prises without a member's guarantee MIGA was estab- portfolio While IBRD believes that its hedging strate- lished to encourage the flow of investments for gies achieve its objectives, the application of FAS 133 productive purposes among member countries and, in qualifying hedge criteria would not make fully evident , , , , , ', ~~~~~~the risk management strategy that IBRD employs particular, to developing member countries by provid- ing guarantees against noncommercial risks for foreign The cumulative effect of a change in accounting princi- investment in its developing member countries ple includes the difference between the carrying value and the fair value of the embedded derivatives and derivative instruments, as defined by FAS 133, in the SUMMARY OF SIGNIFICANT ACCOUNTING borrowings portfolio on July 1, 2000, offset by any AND RELATED POLICIES gains or losses on those borrowings for which a fair financial statements are prepared in conformity value exposure was being hedged Upon adoption of IBRD s anting statem es arerar ed m th FAS 133, IBRD's net income was increased by $219 with the accounting principles generally accepted In the million and an additional $500 million was reported in United States of America and with International other comprehensive income The allocation between Accounting Standards net income and other comprehensive income was based The preparation of financial statements in conformity upon the hedging relationships that existed under gen- with generally accepted accounting principles requires erally accepted accounting principles before the initial management to make estimates and assumptions that application of FAS 133 affect the reported amounts of assets and liabilities and Since IBRD has not defined any qualifying hedging disclosure of contingent assets and liabilities at the date relationships under this standard, the amount recorded of the financial statements and the reported amounts of in other comprehensive income is being reclassified revenue and expenses during the reporting period into earnings in the same period or periods in which the Actual results could differ from these estimates. Signifi- hedged forecasted transactions affect earnings cant judgments have been used in the computation of estimated and fair values of loans and borrowings, the The amounts reclassified into earmings for the year determination of the adequacy of the Accumulated ended June 30, 2001 of $169 million have been Provision for Loan Losses, the determination of net included in Reclassification of FAS 133 Transition periodic income from pension and other postretirement Adjustment to Net Income in the statement of compre- benefits plans, and the present value of benefit obliga- hensive income On the statement of income these tions reclassifications are included in the FAS 133 Adjust- ment Certain reclassifications of the prior years' information have been made to conform to the current year's pre- During fiscal year 2001, IBRD adopted prospectively sentation SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities- Accounting and Reporting Developments On July 1, a replacement of SFAS No 125" This statement 2000, IBRD adopted the Statement of Financial revises the standards for accounting for securitizations Accounting Standards (SFAS) No 133, "Accounting for and other transfers of financial assets and collateral, and Derivative Instruments and Hedging Activities", along requires certain additional disclosures As applied to IBRD FINANCIAL STATEMENTS JUNE 30, 2001 47 IBRD, this statement requires that securities trans- the foreign exchange value of its currency has, in the ferred under repurchase or security lending agreements opinion of IBRD, depreciated to a significant extent in be disclosed separately from other trading invest- its territories and (2) IBRD to reimburse the member in ments Adoption of this standard did not have a mate- the event that the par value of its currency is increased. rial impact on IBRD's financial statements Since currencies no longer have par values, mainte- Translation of Currencies. IBRD's financial statements nance of value amounts are determined by measuring are expressed in terms of U S. dollars solely for the pur- the foreign exchange value of a member's currency pose of summarizing IBRD's financial position and the against the standard of value of IBRD capital based on results of its operations for the convenience of its mem- the 1974 SDR Members are required to make pay- bers and other interested parties. ments to IBRD if their currencies depreciate signifi- IBRD is an international organization which conducts cantly relative to the standard of value. Furthermore, its operations in the currencies of all of its members the Executive Directors have adopted a policy of reim- IBRD's resources are derived from its capital, borrow- bursing members whose currencies appreciate signifi- ings, and accumulated earnings in those various curren- cantly in terms of the standard of value cies IBRD has a number of general policies aimed at The net MOV amounts relating to restricted currencies minimizing exchange rate nsk in a multicurrency envi- out on loan, and amounts that have been reclassified ronment IBRD matches its borrowing obligations in from receivables for those countries that have been in any one currency (after swaps) with assets in the same arrears for two years or more, are included in Amounts currency, as prescribed by its Articles of Agreement, to Maintain Value of Currency Holdings For amounts primarily by holding or lending the proceeds of its bor- on loan, these MOV amounts are shown as a compo- rowings (after swaps) in the same currencies in which nent of Equity since MOV becomes effective only as they are borrowed In addition, IBRD penodically such currencies are repaid to IBRD undertakes currency conversions to more closely match the currencies underlying its Equity with those of the Retained Earnings: Retained Earnings consists of allo- outstanding loans cated amounts (Special Reserve, General Reserve, Pen- sion Reserve and Surplus) and unallocated Net Income Assets and liabilities are translated at market exchange rates in effect at the end of the period. Income and The Special Reserve consists of loan commissions set expenses are translated at either the market exchange aside pursuant to Article IV, Section 6 of the Articles of rates in effect on the dates on which they are recog- Agreement, which are to be held in liquid assets These nized or at an average of the market exchange rates in assets may be used only for the purpose of meeting lia- effect during each month Translation adjustments are bilities of IBRD on its borrowings and guarantees in the charged or credited to Accumulated Other Compre- event of defaults on loans made, participated in, or hensive Income guaranteed by IBRD The Special Reserve assets are included under Investments held in the Trading portfo- Valuation of Capital Stock: In the Articles of Agree- ho, comprising obligations of the United States Govern- ment, the capital stock of IBRD is expressed in terms of ment, its agencies, and other official entities The "U S dollars of the weight and fineness in effect on July allocation of such commissions to the Special Reserve 1, 1944" (1944 dollars) Following the abolition of gold was discontinued in 1964 with respect to subsequent as a common denominator of the monetary system and loans and no further additions are being made to it the repeal of the provision of the U.S. law defining the par value of the U.S dollar in terms of gold, the pre- The General Reserve consists of earnings from prior fis- existing basis for translating 1944 dollars into current cal years which, in the judgment of the Executive dollars or into any other currency disappeared. The Directors, should be retained in IBRD's operations. Executive Directors of IBRD have decided, until such The Pension Reserve consists of the difference between time as the relevant provisions of the Articles of Agree- actual funding of the Staff Retirement Plan (SRP) and ment are amended, that the words "U S dollars of the the SRP's accounting income This Pension Reserve weight and fineness in effect on July 1, 1944" in Article would be reduced if in any future fiscal year pension II, Section 2(a) of the Articles of Agreement of IBRD accounting expenses were to exceed the actual funding are interpreted to mean the Special Drawing Right of the SRP (SDR) introduced by the International Monetary Fund, as the SDR was valued in terms of U S. dollars immedi- Surplus consists of earnings from prior fiscal years ately before the introduction of the basket method of which are retained by IBRD untl a further decision is valuing the SDR on July 1, 1974, such value being made on their disposition or the conditions of transfer $1.20635 for one SDR for specified uses have been met Maintenance of Value Article 11, Section 9 of the Arti- Unallocated Net Income consists of earnings in the cur- cles of Agreement provides for maintenance of the rent fiscal year Commencing in 1950, a portion or all value (MOV), at the time of subscription, of such of the unallocated Net Income has been allocated to restricted currencies (see Note A), requiring (1) the the General Reserve after an assessment by the Execu- member to make additional payments to IBRD in the tive Directors of IBRD's reserve needs Upon recom- event that the par value of its currency is reduced or mendation by the Executive Directors, the Board of 48 THE WORLD BANK ANNUAL REPORT 2001 Governors, consisting of one Governor appointed by additional interest on any overdue interest or loan each member, penodically approves transfers out of charges These present value losses are equal to the dif- unallocated Net Income and Surplus to various entities ference between the present value of payments for for development purposes consistent with IBRD's Arti- interest and charges made according to the related cles of Agreement loan's contractual terms and the present value of its expected future cash flows Such present value losses Loans: All of IBRD's loans are made to or garateed are considered in the determination of the Accumu- by members, except loans to IFC. The majority of lated Provision for Loan Losses IBRD has not written IBRD's loans have repayment obligations based on spe- any ofis outstan Los cific currencies IBRD also holds multicurrency loans which have repayment obligations in various currencies It is the policy of IBRD to place in nonaccrual status all determined on the basis of a currency pooling system loans made to or guaranteed by a member of IBRD if principal, interest, or other charges with respect to any Anyloan originatio fees incorporated in a loas terms such loan are overdue by more than six months, unless are deferred and recognized over the life of the loan as IBRD management determines that the overdue an adjustment of yield However, incremental direct amount will be collected in the immediate future In costs associated with originating loans are expensed as addition, if development credits made by IDA to a incurred as such amounts are considered immaterial member government are placed in nonaccrual status, all The unamortized balance of loan origination fees is loans made to or guaranteed by that member govern- included as a reduction of Loans Outstanding on the ment will also be placed in nonaccrual status by IBRD balance sheet, and the loan origination fees amortiza- On the date a member's loans are placed in nonaccrual tion is included in Interest under Income from Loans on status, unpaid interest and other charges accrued on the income statement , * loans outstanding to the member are deducted from It is IBRD's practice not to reschedule interest or prin- the income of the current period Interest and other cipal payments on its loans or participate in debt charges on nonaccruing loans are included in income rescheduling agreements with respect to its loans In only to the extent that payments have actually been exceptional cases, however, such as when implementa- received by IBRD If collectibility risk is considered to tion of a financed project has been delayed, the loan be particularly high at the time of arrears clearance, the amortization schedule may be modified to avoid sub- member's loans may not automatically emerge from stantial repayments prior to project completion nonaccrual status, even though the member's eligibility for new loans may have been restored A decision on In addition, on May 8, 2001, the Executive Directors the restoration of accrual status is made on a case-by- approved a financial assistance package for the Federal case basis after a suitable period of payment perfor- Republic of Yugoslavia (FRY] in connection with its mance has passed from the time of arrears clearance succession to membership of the former Socialist Fed- eral Republic of Yugoslavia (SFRY) in IBRD. One com- IBRD determines the Accumulated Provision for Loan ponent of that package is a plan for the clearance of Losses based on an assessment of collectibility risk in arrears under all loans to the former SFRY for which the total loan and callable guarantees portfolio, includ- the FRY has accepted liability Under the arrears clear- ing loans in nonaccrual status The accumulated provi- ance plan, FRY's principal and interest arrears would be sion is periodically adjusted based on a review of the consolidated into one or more new IBRD loans. The prevailing circumstances Adjustments to the accumu- exact terms of the consolidation loans are being negoti- lated provision are recorded as a charge or addition to ated with the FRY authorities income In the context of determining the adequacy of the Accumulated Provision for Loan Losses, IBRD con- IBRD's treatment of FRY is based on criteria approved siders the present value of expected cash flows relative by the Executive Directors in connection with the to the contractual cash flows for loans financial assistance package for Bosnia and Herzegovina in 1996 These criteria limit eligibility for such treat- Investments: Investment securities are classified based ment to a country (a) that has emerged from a current on management's intention on the date of purchase or former member of IBRD, (b) that is assuming Securities which management has the intention and responsibility for a share of the debt of such member, ability to hold until maturity are classified as Held-to- (c) that, because of a major armed conflict in its terrn- maturity and reported at amortized cost Securities des- tory involving extensive destruction of physical assets, ignated for other postretirement benefits are carried has limited creditworthmess for servicing the debt it is and reported at market value or at their estimated fair assuming; and (d) for which rescheduhng/refinancing values. The changes in the values of the securities desig- would result in a significant improvement in its repay- nated for other postretirement benefits are included in ment capacity, if appropriate supporting measures are the determination of net income All other investment taken IBRD does not believe that any other borrowers securities are held in a Trading portfolio and classified with loans in nonaccrual status currently meet these eli- as an element of liquidity in the Statement of Cash gibility criteria Flows due to their nature and IBRD's policies govern- ing the level and use of such investments Investment Delays in receiving loan payments result in present securities and related financial instruments held in value losses to IBRD since it does not charge fees or IBRD's Trading portfolio are carried and reported at IBRD FINANCIAI STATEMENTS JUNE 30, 2001 49 market value Unrealized gains and losses for invest- ognized as an adjustment of the borrowing cost over ment securities and related financial instruments held the remaining life of the borrowing In instances where in the Tradmng portfolio are included in income Denva- the underlying borrowing was prepaid, the change in tive instruments are used in liquidity management to the associated derivative's market value was recognized take advantage of profitable trading opportunities and immediately as an adjustment to the cost of the under- as a proxy for cash securities These instruments lying borrowing instrument However, upon adoption include short-term, over-the-counter foreign exchange of FAS 133, these derivatives are carried at market forwards, currency swaps, cross-currency interest rate value swaps, interest rate swaps, and exchange-traded futures Other Derivatives As part of asset/liability manage- and options on fixed income instruments These denva- Ot, Dered into anu er/ofaurreny maps tives are carried at market value. From time to time, ment, IBRD entered to a number of currency swaps IBRD enters into forward contracts for the sale or pur- in fiscal year 2001 to better align Its currency composi- chase of investment securities, these transactions are tion of Equity with that of loans These currency swap recorded at the time of commitment payables and receivables are recorded at market value in accordance with FAS 133 Securities Purchased Under Resale Agreements and Fair Value Disclosures. Financial instruments for Securities Sold Under Repurchase Agreements and which market quotations are available have been valued Payable for Cash CoUateral Received: Secuntles pur- the vl market vare ancal instrumen for chased under resale agreements and securities sold attheprevalingmarketvalue Fiancialinstrumentsfor under repurchase agreements are recorded at historical which market quotations are not readily available have cost IBRD receives securities purchased under resale been valued using methodologies and assumptions that agreements, monitors the fair value of the securities necessarily require the use of subjective judgments and f necessary, requires additional collateral Accordingly, the actual value at which such financial and, if necessary,mrequires additional collateral instruments could be exchanged in a current transac- Borrowings To ensure funds are available for lending tion or whether they are actually exchangeable may not and liquidity purposes, IBRD borrows in the worldwide be determinable capital markets offering its securities to private and gov- ernmental buyers IBRD issues short-term and medium- and long-term debt instruments denominated NOTE A-CAPITAL STOCK, RESTRICTED CUR- in various currencies with both fixed and adjustable RENCIES, MAINTENANCE OF VALUE, AND interest rates Borrowings are carried on the balance MEMBERSHIP sheet at their par value (face value), adjusted for any Capital Stock: At June 30, 2001, IBRD's capital com- unamortized premiums or discounts, and include prised 1,581,724 (1,581,724-June 30, 2000) autho- adjustments for embedded derivatives and fair value rized shares, of which 1,570,895 (1,563,443-June 30, hedges that existed at June 30, 2000, as required by 2000) shares had been subscribed Each share has a par FAS 133. Issuance costs associated with a bond offering value of 0.] million 1974 SDRs, valued at the rate of are deferred and amortized over the period during $1 20635 per 1974 SDR. Of the subscribed capital, which the related indebtedness is outstanding The $11,476 million ($11,418 million-June 30, 2000) has unamortized balance of the issuance costs is included in been paid in, and the remaining $178,029 million Other Assets on the balance sheet, and the issuance ($177,188 million-June 30, 2000) is subject to call costs amortization is presented as a separate element only when required to meet the obligations of IBRD under Borrowing Expenses on the income statement created by borrowing or guaranteeing loans Amortization of discounts and premiums is included in Interest under Borrowing Expenses on the income Currencies Subject to Restrictions: A portion of capital statement. subscriptions paid in to IBRD has been paid in the local currencies of the members. These amounts, referred to IBRD uses derivatives in its borrowing and liability as restricted currencies, are usable by IBRD in its lend- management activities to take advantage of cost saving ing operations, only with the consent of the respective opportunities across capital markets to lower its fund- members, and for administrative expenses. ing costs. These instruments include currency and interest rate swaps, swap spread-locks, swaptions, and Maintenance of Value: Of the total amount of $912 structures with embedded optionality These denva- million ($522 million-June 30, 2000) included in tives are used to modify the interest rate and/or cur- Amounts to Maintain Value of Currency Holdings, rency characteristics of the borrowing portfolio The which has been deducted from equity, $198 million interest component of these derivatives is recognized as ($169 million-June 30, 2000) represents MOV an adjustment to the borrowing cost over the life of the receivables for countries that have amounts in arrears derivative contract and included in Interest under Bor- for two years or more IBRD still considers these MOV rowing Expenses on the income statement Prior to the receivables in arrears as obligations due from the mem- adoption of FAS 133 on July 1, 2000, all derivatives bers concerned. The remaining $714 million ($353 mil- were recorded on an histoncal cost basis using synthetic lion-June 30, 2000) represents net MOV amounts accounting, upon termination, the change in the denva- relating to restricted currencies out on loan that tive's market value was recorded as an adjustment to become payable under the same terms as other MOV the carrying value of the underlying borrowing and rec- 50 THE WORLD BANK ANNUAL REPORT 2001 obligations only after such currencies are repaid to NOTE B-INVESTMENTS IBRD As part of its overall portfolio management strategy, Membership: In February 1993, IBRD's Executive IBRD invests in government and agency obligations, Directors decided that the former Socialist Federal time deposits, asset-backed securities, repurchase agree- Republic of Yugoslavia (SFRY) had ceased to be a mem- ments, securities loans, resale agreements and related ber of IBRD and that the Republic of Bosnia and financial denvatives including futures, forward con- Herzegovina (now called Bosnia and Herzegovina), the tracts, currency swaps, cross-currency interest rate Republic of Croatia, the former Yugoslav Republic of swaps, interest rate swaps, options and short sales Macedonia, the Republic of Slovenia and the Federal For government and agency obligations, IBRD may only Republic of Yugoslavia (FRY) were authorized to suc- invest in obligations issued or unconditionally guaran- ceed to the SFRY's membership when certain require- teed by goverments of countnes with a minimum ments were met, including entenng into an agreement credit rating of AA, however, if such obligations are with IBRD on IBRD's loans made to or guaranteed by denominated in the home currency of the issuer, no rat- the SFRY which the particular successor Republic would assume On May 8, 2001, the Executive Direc- ing Is required. IBRD may only nmvest In obligations tors approved a membership and financial assistance Of a country, a ncyorintrumentality of a government packge or te FY i conecton ith ts uccesio ofa contr, amultilateral organization or any other package for the FRY in connection with Its succession official entity with a minimum credit rating of AA For to membership of the former SFRY in IBRD One asset-backed securities, IBRD may only invest in securi- component of that package is a plan for the clearance of . ' arrears under all loans to the former SFRY for which ties with a AAA credit rating FRY has accepted liability. The paid-in portion of the With respect to futures and options, IBRD generally SFRY's subscribed capital allocated to the FRY which closes out most open positions prior to maturity was included under Payments on Account of Pending Therefore, cash receipts or payments are mostly limited Subscriptions in fiscal year 2000, is now included in to the change in market value of the futures and capital stock All five of the successor Republics have options contracts. Futures contracts generally entail now become members of IBRD. daily settlement of the net cash margin For options, IBRD only invests in exchange-traded options The initial price of an option contract is equal to the premium paid by the purchaser and is signifi- cantly less than the contract or notional amount IBRD does not write uncovered option contracts as part of its investment portfolio strategy. As of June 30, 2001, IBRD had received $319 million of securities under resale agreements None of these securities has been included in the assets of IBRD Held-to-maturity portfolio: During fiscal year 1999, IBRD liquidated the securities in the held-to-matunty portfolio and thereby realized a gain of $237 million IBRD FINANCIAL STATEMENTS JUNE 30, 2001 51 Liquid Portfolio: A summary of IBRD's position in trading and other liquid portfolio instruments at June 30, 2001 and June 30, 2000 is as follows In millions of US dollars equivalent Other All Euroa Japanese yen US dollars currencies currencies 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 Trading: Government and agency obligations Carrying value 5,359 3,386 2,221 3,596 1,118 911 21 34 8,719 7,927 Average balance during fiscal year 4,355 2,253 2,935 4,266 1,200 1,020 19 53 8,509 7,592 Net gains (losses) for the fiscal year 8 (56) 5 (50) 9 (12) * . 22 (118) Average yield () 4 75 4 87 0 24 (0 18) 4 83 6 77 5 09 631 3 59 2 77 Average maturity (years) 2 94 1 52 3 27 1 09 3 80 1 08 0 29 1 27 313 1 27 Time deposits Carryingvalue 848 3,252 188 289 9,014 7,289 980 1,611 11,030 12,441 Average balance during fiscal year 1,705 2,895 311 564 8,495 11,790 1,064 1,339 11,575 16,588 Average yield(%) 4 62 4 31 0 08 0 08 4 14 695 4 99 519 418 5 87 Average maturity (years) 0 09 0 26 0 02 015 0 08 0 13 0 04 0 16 0 07 017 Asset-backed securities Carrying value - - - - 4,413 4,573 - - 4,413 4,573 Average balance durung fiscal year - - - - 4,494 3,966 - - 4,494 3,966 Net gains (losses) for the fiscal year - _ _ - 22 (1) - - 22 (1) Average yield (%) - - - - 4 92 6 60 - - 4 92 6 60 Average matunty (years) - - - - 8 37 7 55 - - 8 37 7 55 Options, futures and forwards Carrying value - () - 6 - - - 6 (') Average balance during fiscal year () 2 ' 2 - 2 2 Net gains (losses) for the fiscal year - I - () () I - () () 2 Total Trading Investments'* Carrying value 6,207 6,638 2,409 3,885 14,551 12,773 1,001 1,645 24,168 24,941 Average balance during fiscal year 6,060 5,150 3,246 4,830 14,191 16,776 1,083 1,392 24,580 28,148 Net gains (losses) for the fiscal yearb 8 (55) 5 (50) 31 (12) ' 44 (117) Repurchase agreements & securities loans: Carrying value - - - - (207) - - - (207) - Average balance durung fiscal year - - _ - (108) (76) - - (108) (76) Average cost (%) - - - - 4 13 - - - 413 - Average maturity (years) - - - - 0 01 - - - 0 01 - Resale agreements: Carrying value - - - - 322 101 - - 322 101 Average balance dunng fiscal year - 3 - - 506 204 - - 506 207 Average yield (%) - - - - 4 34 6 50 - - 4 34 6 50 Average maturity (years) - - - - 0 01 238 - - 0 01 2 38 52 THE WORLD BANK ANNUAL REPORT 2001 In mniltons of US dollars equivalent Other All Euroa Japanese yen US dollars currencies currencies 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000 Short sales.' Carryingvalue - - - - (63) (100) - - (63) (100) Average balance dunng fiscal year - - - - (214) (35) - - (214) (35) Currency swaps receivable: Carrymgvalue - - - - 1,354 4,189 - - 1,354 4,189 Average balance during fiscal year - I - - 2,248 3,819 14 27 2,262 3,847 Average yield (%) - - - - 4 36 6.71 - - 4 36 6 71 Average matunty (years) - - - 0 08 0 27 - - 008 0 27 Currency swaps payable: Carrying value (683) (2,907) (40) (103) - - (600) (1,164) (1,323) (4,174) Average balance during fiscalyear (1,465) (2,482) (90) (302) (14) (28) (665) (991) (2,234) (3,803) Average cost (%) 4 60 4 28 0 06 014 - - 518 5 39 4 72 4 48 Average maturity (years) 0 11, 0 30 0 07 0 39 - - 0 06 0 22 008 0 28 Cross-currency interest rate swaps receivable d Carrying value - - 892 291 8,797 6,837 - - 9,689 7,128 Average balance during fiscal year - - 537 277 7,729 6,232 - - 8,266 6,509 Net gains (losses) for the fiscal year b - - (7) (3) 20 () - - 13 (3) Average yield (%) - - 0 07 0 41 4 30 650 - - 3 91 6 25 Average matunty (years) - - 0 31 1 12 2 23 1 30 - - 2 05 1 30 Cross-currency interest rate swaps payable d Carryng value (5,365) (3,381) (3,116) (3,882) (952) (258) (18) (21) (9,451) (7,542) Average balance during fiscal year (4,359) (2,251) (3,443) (4,535) (536) (251) (19) (55) (8,357) (7,092) Net gains (losses) for the fiscal year b (14) 56 (1) 54 (2) (.) ('1 (1) (17) 109 Average cost (%) 4 72 4 87 0 14 (0 14) 3 88 6 50 5 06 631 3 11 2 33 Average maturity (years) 2 95 1 54 149 112 031 1 28 0 29 1 27 2 19 1 31 Net Interest rate swaps d Carrying value - - - - (17) (4) - - (17) (4) Average balance during fiscal year _ _ _ - (7) (10) - - (7) (10) Net gains (losses) for the fiscal year b - - _ - 1 17 - - 1 17 Average cost(%) - - - - 0 05 0 07 - - 0 05 0 07 Averagematurity (years) - - - - 090 1 18 - - 090 1 18 a Effective January 1, 1999, the euro was introduced For reporting purposes, holdings in the twelve natonal currencies that are consid- ered national currency units of the euro have been aggregated wtth the euro and reported as euro in both the current and pnor year b Included in Net gains flosses) on the Trading portfolio in the income statement c Included in Amounts Payable for Investment Secunties Purchased on the balance sheet d Included in Currency and Interest Rate Swaps-Trading on the balance sheet Less than $0 5 million, 0.005 percent, or 0 05 years May differfrom the sum of tndtvtdualfigures due to rounding IBRD FINANCIAL STATEMENTS JUNE 30, 2001 53 NOTE C-LOANS, COFINANCING AND Single Currency Loans GUARANTEES Fixed-rate loans: IBRD introduced fixed rate single IBRD's loan portfolio includes multicurrency loans, sin- currency loans in 1995 The rates charged on fixed rate gle currency pool loans and single currency loans Each single currency loans are set on semi-annual rate fixing of these is descnbed below. At June 30, 2001 only sin- dates for loan amounts disbursed during the preceding gle currency loans which carry either a variable or fixed six-month period and remain fixed for such disbursed spread were available for new commitments amounts until they are repaid For the interim period from the date each disbursement is made until its rate Multicurrency Loans fixing date, interest accrues at a vanable rate equal to Fixed rate loans: On loans negotiated prior to July the rate on LIBOR-based single currency loans applica- 1982, IBRD charges interest at fixed rates ble for such interim period The fixed lending rate com- prises a base rate reflecting medium- to long-term Adjustable rate loans: In 1982, IBRD mitigated its market rates on the semi-annual rate-fixing date for interest rate risk by moving from fixed rate to adjust- loan amounts disbursed during the preceding six- able rate lending. This rate, reset twice a year, is based month period, plus a total spread consisting of (a) on IBRD's own cost of qualified borrowings plus a lend- IBRD's funding cost margin for these loans in the loan ing spreada, resulting in a pass-through of its average currency, (b) a market risk premium (intended to com- borrowing costs to those members that benefit from pensate IBRD for market risks incurred in funding IBRD loans IBRD has withdrawn these loan terms for these loans), and (c) a lending spread As of December commitments for which the invitation to negotiate was 1, 1999, fixed-rate single currency loans were no longer issued on or after March 1, 2001 available for new commitments Single Currency Pool Loans Variable-Spread loans: IBRD introduced variable- In fiscal year 1997, IBRD offered its borrowers the spread single currency loans in 1993 The rates charged opportunity to convert their existing multicurrency on vanable-spread single currency loans are a pass- pool loans to single currency pools These pools were through of IBRD's cost of funding for these loans, and available in four currencies (U S. dollar, Japanese yen, are reset semi-annually They comprise a base rate Deutsche mark, or Swiss franc) At inception, each sin- equal to the six-month reference interbank offered rate gle currency pool reflected the composition of the mul- for the applicable currency on the rate reset date and a ticurrency pool However, as of June 30, 1999, all of total spread consisting of (a) IBRD's average funding the pools had exceeded the 90% target in the desig- cost margin for these loans and (b) a lending spread nated currency All adjustable rate multicurrency Pool Certain vanable-spread single currency loans, including loans that were converted to single currency pools carry the Special Structural and Sector Adjustment Loans the applicable pool's adjustable lending rate, reset semi- introduced in fiscal year 1999, have non-standard annually to reflect the previous semester average cost of terms These loans have a fixed spread ranging from 75 outstanding borrowings allocated to fund that pOOl to 400 basis points over LIBOR, a front-end fee, and weighted by the shares of currencies in the pool, plus a are not eligible for waivers of interest or commitment spread of 50 basis points Any fixed-rate multicurrency charges. pool loans that were converted to single currency pools continued to carry their fixed rate Fixed-Spread loans: IBRD introduced fixed-spread loans in fiscal year 2000 These loans have an interest rate based on LIBOR plus a spread that will be fixed for the life of the loan The spread is currently 55 basis points for U S dollar and euro denominated loans, and 50 basis points for Japanese yen denominated loans A commitment charge premium of 10 basis points over the standard 75 basis points charged on other IBRD loans will be included for the first four years from the date the commitment charge begins to accrue Borrowers selecting this product have the flexibility to change the currency or interest rate basis over the life of the loan, subject to certain conditions a Until July 31, 1998, the lending spread was 50 basis points However, during the first quarter of fiscal year 1999, the lending spread charged by IBRD to its borrowers was increased by 25 basis points to 75 basis points for loans where the tnvitation to negottate was issued on or after July 31, 1998 In addition, a front-end fee of 100 basis points, payable for each such loan at the time it becomes effective, was introduced 54 THE WORLD BANK ANNUAL REPORT 2001 Waivers of Loan Interest and Commitment fiscal year ended June 30, 2001, the combined effect of Charges these waivers was to reduce Net Income by $139 mil- For payment periods beginning during the fiscal year lion ($59 million-June 30, 2000, $102 million-June ended June 30, 2001, the following interest waivers on 30, 1999) disbursed and outstanding loans to eligible borrowers A one-year commitment charge waiver of 50 basis were in effect With respect to loans for which the points was m effect on all eligible undlsbursed loans to nvitation to negotiate was Issued on or after July 31, all borrowers for all payment periods commencing in 1998, and which carry a 75 basis point lending spread, the fiscal year ended June 30, 2001 A similar waiver of the interest waiver was 25 basis points A similar 50 basis pomts was in effect for the fiscal years ended waiver was in effect for the fiscal years ended June 30, June 30, 2000 and June 30, 1999. For the fiscal year 2000 and June 30, 1999. With respect to loans for ended June 30, 2001, the effect of the commitment which the invitation to negotiate was issued before July charge waiver was to reduce Net Income by $169 mil- 31, 1998, and which carry a 50 basis point lending lion ($207 million-June 30, 2000, $229 million-June spread, the interest waiver was 15 basis points A 30 1999) waiver of 5 basis points was in effect during the fiscal years ended June 30, 2000 and June 30, 1999 For the A summary of IBRD's outstanding loans by currency and product at June 30, 2001 and June 30, 2000 follows In millions of US dollars equivalent 2001 Euroa Japanese yen US dollars Others Loans Outstanding Fixed Adjust Ftxed Adjust Fixed Adjust Fixed Adjust Fixed Adjust Total Multicurrency loansb,c Amount $ 261 $ 8,417 $206 $ 9,865 $ 351 $10,447 $160 $1,534 $ 978 $ 30,263 $ 31,241 Weighted average rate (%)d 8 15 5 04 8 09 5 04 8 39 5 13 7 84 5 04 8 17 5 07 5 17 Single currency pools Amount $ 3 $ 2,997 $ - $ 47 $ 26 $27,448 $ - $ - $ 29 $ 30,492 $ 30,521 Weighted average rate (%)d 10 93 7 26 - 3 94 11 37 8 76 - - 11 33 8 61 8 61 Average Maturity (years) 0 47 4 02 - 3 25 0 45 4 26 - - 0 45 4 24 4 23 Single currency loanse Amount $ 522 $ 1,468 $ - $ 137 $14,467 $37,308 $ - $ 2 $14,989 $ 38,915 $ 53,904 Weighted average rate (%)d 5 48 4 79 - 0 31 6 74 5 55 - 3 38 6 69 5 50 5 83 Average Maturity (years) 4 87 6 68 - 7 09 4 82 6 02 - 4 47 4 82 6 05 5 70 Fixed-spread single currency loans Amount $ 265 $ 64 $ - $ - $ 215 $ 2,656 $ - $ - $ 480 $ 2,720 $ 3,200 Weighted average rate (%)d 6 29 5 04 - - 6 92 4 61 - - 6 57 4 62 4 91 Total Loans Amount $1,051 $12,946 $206 $10,049 $15,059 $77,859 $160 $1,536 $16,476 $102,390 $118,866 Weighted average rate (%)d 6 36 5 52 8 09 4 97 6 79 6 59 7 84 5 04 6 79 6 27 6 35 Total loans $118,866 Less accumulated provision for loan losses and deferred loan income 4,459 Net loans outstanding $114,407 Note' Forfootnotes seefollowingpage IBRD FINANCIAL STATEMENTS. JUNE 30, 2001 55 In mtllions of US dollars equtvalent 2000 Euroa Japaneseyen US dollars Others Loans Outstanding Fixed Adjust Fixed Adjust Fixed Adjust Fixed Adjust Fixed Adjust Total Multicurrency loansb,c Amount $ 386 $10,004 $364 $12,622 $ 479 $11,283 $221 $1,641 $ 1,450 $ 35,550 $ 37,000 Weighted average rate (%)d 8 28 5 23 8 30 5 23 8 08 5 28 7 92 5 23 8 16 5 24 5 36 Single currency pools Armount $ 7 $ 3,860 $ - $ 68 $ 63 $31,424 $ - $ - $ 70 $ 35,352 $ 35,422 Weighted average rate (%)d 10 61 6 71 - 4 05 11 06 8 66 - - 11 01 8 44 8 44 Average Maturity (years) 0 85 4 31 - 3 50 0 84 4 63 - - 0 84 4 59 4 59 Single currency loanse Amount $ 463 $ 1,126 $ - $ 160 $12,486 $32,476 $ - $ 3 $12,949 $ 33,765 $ 46,714 Weighted average rate (%)d 5 46 4 50 - 0 35 6 76 7.29 - 3 25 6 71 7 16 7 04 Average Maturity (years) 5 20 6 81 - 7 84 5 45 6 47 - 4 97 5 44 6 48 6 20 Fixed-spread single currency loans Amount $ 229 $ - $ - $ - $ - $ 739 $ - $- $ 229 $ 739 $ 968 Weighted average rate (%)d 6 36 - - - - 7 57 - - 6 36 7 57 7 28 Total Loans Amount $1,085 $14,990 $364 $12,850 $13,028 $75,922 $221 $1,644 $14,698 $105,406 $120,104 Weighted average rate (%)d 6 69 5 55 8 30 5 16 6 83 7 56 7 92 5 23 6 87 6 95 6 94 Total loans $120,104 Less accumulated provision for loan losses and deferred loan income 3,860 Net loans outstanding $116,244 a Effective January 1, 1999, the euro was introduced For repornng purposes, amounts in the twelve national currencies that are considered nattonal currency units of the euro have been aggregated with the euro and reported as euro in both the current and pnoryear b Includes pre-pool loans, loans to IFC, and co-financing loans in addition to multicurrency pool loans c Average Maturity - Multicurrency loans IBRD maintains a targeted currency compositnon in its multicurrency loans The present target ratto is one US dollarfor every 125 Japanese yen and one euro These three major currencies compnse at least 90% of the mulncurrency loans' US dol- lar equivalent value, with the remainder in other currencies This ratio was changed in January 1999 as a result of the introduction of the euro The composition of the multicurrency loans is affected by the selectzon of currencies for disbursements on those loans and by the currencies selected for the billing of the pnncipal repayments Along with the selection of disbursement currencies, IBRD manages the selection of repayment currencies to maintain the alignmentofthe multicurrency loans' composition with the target ratio Theselection of currenciesforrepaymentbillingby IBRD precludes the determination of average matunrty information for multicurrency loans by individual currency Accordingly, IBRD only discloses the matunty penodsfor its multtcurrency loans on a combined US dollars equivalent basis d Excludes effects of any waivers of loan interest e Includes fixed-rate and variable-spread loans 56 THE WORLD BANK ANNUAL REPORT 2001 The maturity structure of IBRD's loans at June 30, 2001 and June 30, 2000 is as follows. In millions 2001 July I,2001 through JulyI, 2002 through July), 2006 through Product/Rate Type June 30, 2002 June 30, 2006 June 30, 2011 Thereafter Total Multicurrency loans Fixed $ 690 $ 256 $ 32 $ - $ 978 Adjustable 4,306 13,531 10,315 2,111 30,263 Single currency pools Fixed 28 1 - - 29 Adjustable 4,511 14,844 9,592 1,545 30,492 Single currency loansa Fixed 788 7,469 6,374 358 14,989 Adjustable 1,664 16,226 14,478 6,547 38,915 Fixed-spread single currency loans Fixed - 43 232 205 480 Adjustable - 49 1,913 758 2,720 All Loans Fixed 1,506 7,769 6,638 563 16,476 Adjustable 10,481 44,650 36,298 10,961 102,390 Total loans outstanding $11,987 _$52 4 9 $42,936 $11,524 $118866 In millions 2000 July 1, 2000 through July 1, 2001 through July 1, 2005 through Product/Rate Type June 30, 2001 June 30, 2005 June 30, 2010 Thereafter Total Multicurrency loans Fixed $ 960 $ 429 $ 61 $ - $ 1,450 Adjustable 4,531 15,097 12,717 3,205 35,550 Single currency pools Fixed 42 28 - - 70 Adjustable 4,728 16,157 11,949 2,518 35,352 Single currency loansa Fixed 324 5,790 6,130 705 12,949 Adjustable 684 13,504 13,491 6,086 33,765 FLxed-spread single currency loans Fixed - I 0 95 124 229 Adjustable - - 687 52 739 All Loans Fixed 1,326 6,257 6,286 829 14,698 Adjustable 9,943 44,758 38,844 11,861 105,406 Total loans outstanding $11,269 $51 015 $45,130 $_2,690 $120 104 a Includes fixed-rate and variable-spread loans Estimated Value of Loans IBRD's estimate of the probable expected cash flows of All of IBRD's loans are made to or guaranteed by coun- these instruments to IBRD. tries that are members of IBRD, except for those loans The estimated value of all loans is based on a dis- made to IFC IBRD does not currently sell its loans, nor counted cash flow method The estimated cash flows does it believe there is a comparable market for its from principal repayments and interest are discounted loans The estimated value of loans incorporates by the market yield curves applicable to IBRD funding IBRD FINANCIAL STATEMENTS JUNE 30, 2001 57 plus IBRD's relevant basis point lending spread The following table reflects the carrying and estimated adjusted for waivers values of the loan portfolio at June 30, 2001 and June 30, 2000 In miUtons 2001 2000 Carrying Estimated Carrying Estmated value value value value Multicurrency loans Fixed $ 978 $ 1,000 $ 1,450 $ 1,482 Adjustable 30,263 31,830 35,550 36,842 Single currency pools Fixed 29 30 70 72 Adjustable 30,492 32,701 35,352 36,681 Single currency loansa Fixed 14,989 15,326 12,949 12,484 Adjustable b 38,915 38,966 33,765 33,735 Fixed-spread single currency loans Fixed 480 487 229 230 Adjustable 2,720 2,722 739 739 Total loans Fixed 16,476 16,843 14,698 14,268 Adjustable 102,390 106,219 105,406 107,997 Total loans outstanding 118,866 123,062 120,104 122,265 Less accumulated provision for loan losses and deferred loan income 4,459 4,459 3,860 3,860 Net loans outstanding $114,407 $118,603 $116,244 $118,405 a Includes fixed-rate and vanable-spread loans b Amount includes carrying value of $11,301 mtllion ($10,800 million-June 30, 2000) and estzmated value of $11,319 million ($10,789 million-June 30, 2000) for non-standard single currency loans Cofinancing and Guarantees which $11 million ($10 million-June 30, 2000) were IBRD has taken direct participations in, or provided subject to call partial guarantees of, loans syndicated by other financial Overdue Amounts institutions for projects or programs also financed by IBRD through regular loans IBRD also has provided At June 30, 2001, no loans payable to IBRD, other than partial guarantees of securities issued by an entity eligi- those referred to in the following paragraph, were over- ble for IBRD loans IBRD's partial guarantees of bond due by more than three months issues are included in the guarantees amount men- At June 30, 2001, the loans made to or guaranteed by tioned below IBRD's direct participations in syndicated certain member countries with an aggregate principal loans are included in the reported loan balances balance outstanding of $2,832 million ($2,031 mil- Guarantees of loan principal of $1,488 million at June lion-June 30, 2000), of which principal of $1,331 mil- 30, 2001 ($1,661 million-June 30, 2000), were not lion ($1,302 million-June 30, 2000) was overdue, included in reported loan balances At June 30, 2001, were in nonaccrual status At such date, overdue inter- $473 million of these guarantees were subject to call est and other charges in respect of these loans totaled ($467 million-June 30, 2000) In some cases, IBRD $1,087 million ($1,060 million-June 30, 2000) If guarantees have included interest payments in addition these loans had not been in nonaccrual status, income to principal Total interest guarantees at June 30, 2001 from loans for the fiscal year ended June 30, 2001, were $117 million ($20 million-June 30, 2000), of would have been higher by $80 milhon ($52 million- June 30, 2000, $55 million-June 30, 1999) 58 THE WORLD BANK ANNUAL REPORT 2001 A summary of countries with loans or guarantees in nonaccrual status follows In milions 2001 Pnncipal Pnncipal and Nonaccnual Borrower outstanding charges overdue since With overdues Congo, Democratic Republic of $ 80 $ 126 November 1993 Congo, Republic of 42 34 November 1997 C6te d'lvoire 526 50 March 2001 Iraq 35 63 December 1990 Liberia 122 282 June 1987 Syrian Arab Republic 18 704 February 1987 Yugoslavia, Federal Republic of 1,066 1,745 September 1992 Zimbabwe 395 48 October 2000 Total 2,284 2,418 Without overdues Bosnia and Herzegovina 548 - September 1992 Total $2,832 $2,418 a Represents interest and charges overdue On May 8, 2001, the Executive Directors approved a The average recorded investment in nonaccruing loans membership and financial assistance package for the durng the fiscal year ended June 30, 2001, was $2,424 FRY at which time the FRY accepted liability for all million ($2,057 million-June 30, 2000, $2,084 mil- loans allocated to it by the SFRY One component of lion-June 30, 1999) that package is a plan for the clearance of arrears under which FRY's principal and interest arrears would be Drn the fiscal years ended June 30, 2001 and June consolidated into one or more new IBRD loans The 30, 2000, no loans came out of nonaccrual status Dur- exact terms of the consolidation loans are being negoti- infalwyear 2001, all loans made to or guaranteed by ated with the FRY authorities Zimbabwe and Cote dIvoire were placed i nonaccrual status During fiscal year 1998, the Syrian Arab Republic and IBRD entered into an agreement covering, among other Accumulated Provision for Loan Losses things, the application of payments by Syria of its over- IBRD has always eventually collected all contractual due principal, interest, and charges Under this agree- principal and interest on its loans However, IBRD suf- ment, Syna paid the overdue principal to IBRD in one fers losses resulting from the difference between the payment of $263 million on September 2, 1997 and discounted present value of expected payments for has been making monthly payments to IBRD since interest and charges according to the related loan's con- then tractual terms and the actual cash flows Certain bor- rowers have found it difficult to make timely payments In June 1996, the accumulated arrears on loans to the for protracted iods,freult in their lanbeng former SFRY assumed by Bosnia and Herzegovina were por protracted perlods, resulta g S thelr loans behng cleared through three new consolidation loans placed rm nonaccrual status Several borrowers have extended by IBRD These new loans consolidated all emerged from nonaccrual status after a pernod of tlme outstanding pnncipal and overdue interest on the loans oy svnging up-to-date all prsincpal payments and ao l assumed by Bosnia and Herzegovina This resulted in overdue serv.ce payments, ricluding h nterest and other an increase in loans outstanding of $168 million and the charges. To recogmize the risks anherent its loan port- deferral of the recognition of the related interest loan losses Of the Accumulated Provision for Loan income Losses of $3,959 million at June 30, 2001 ($3,400 mil- IBRD FINANCIAL STATI EMENTI S JUNE 30, 2001 59 lion-June 30, 2000), $1,090 million is attributable to not be put at risk by unsustainable external debt bur- the nonaccruing loan portfolio ($700 million-June 30, dens. Under this initiative, creditors are to provide debt 2000) relief for those countries that demonstrated good policy performance over an extended period to bring their Changes to the Accumulated Provision for Loan Losses detbrnsosuaibllvlsIR hstknte fr th fica yas ene Jun 30 01,Jn 320 debt burdens to sustainable levels IBRD has taken the for thne s e, 2001, June 30,r2000 situation of these countries into account in its review of and June 30, 1999 are summarized below the adequacy of the Accumulated Provision for Loan In mtllwms Losses 2001 2000 1999 Fifth Dimension Program Under IDA's Fifth Dimension program established in Balance, beginning of September 1988, a portion of principal repayments to the fiscal year $3,400 $3,560 $3,240 IDA are allocated on an annual basis to provide supple- Provision for loan losses 676 (166) 246 mentary IDA credits to IDA-eligible countries that are Translation adjustment (117) 6 74 no longer able to borrow on IBRD terms, but have out- standing IBRD loans approved prior to September Balance, end of the fiscal 1988 and have in place an IDA-supported structural year $3,959 $3,400 $3,560 adjustment program Such supplementary IDA credits are allocated to countries that meet specified condi- tions, in proportion to each country's interest payments In fiscal year 2001, a reassessment of the probable due that year on its pre-September 1988 IBRD loans. lossesinherenti the portfoi resud in aTo be eligible for such IDA supplemental credits, a losses inherent in the portfolio resulted in an increase in mebrcutyms etIAseiiiiyciei o provisioning requirements at June 30, 2001, as com- pared to June 30, 2000 The factors that contributed to lending, must be ineligible for IBRD lending and must the increase in provisioning requirements were the not have had an IBRD loan approved within the last movement of the loans mad to orguaranteedby twelve months To receive a supplemental credit from movement of the loans madte to or guaranteed by two thprga,am beconycnotemrehn borrowers into nonaccrual status, and a net deteriora- the program, a member country cannot be more than tion in the creditworthiness of the accrual portfolio. 60 days overdue on its debt-service payments to IBRD or IDA At June 30, 2001, IDA had approved credits of IBRD has endorsed a multilateral initiative for address- $1,679 million ($1,659 million-June 30, 2000) under ing the debt problems of a group of countries, identi- this program from inception, of which $1,651 million fied as heavily indebted poor countries (HIPCs), to ($1,630 million-June 30, 2000) had been disbursed to ensure that the reform efforts of these countries will the eligible countries 60 THE WORLD BANK ANNUAL REPORT 2001 NOTE D-BORROWINGS benefit from IBRD loans IBRD undertakes swap trans- Providing liquidity and minimizing the cost of funds are actions with a list of authorized counterparties Credit key objectives to IBRD's overall borrowing strategy limits have been established for each counterparty IBRD uses swaps in its borrowing strategy to lower the Swaps include currency swaps, interest rate swaps, for- overall cost of its borrowings for those members who ward interest rate swaps, and swaptions A summary of IBRD's borrowings portfolio at June 30, 2001 and June 30, 2000 follows. Medium- and Long-term Borrowings and Swaps at June 30, 2001 In millions of US dollars equivalent Currency Interest rate Direct borrowtings swap agreements' swap agreements Net currency obligations Wgtd Wgtd Notzonal Wgtd Wgtd avg Average Amount avg Average amount avg Average Amount avg Average Currencyl cost matunty payable cost matunty payable cost matunty payable cost matunrib Rate type Amount (%) (years) (receivable) (%) (years) (receivable) (%) (years) (receivable) (%) (years) Euro' Fixed $12,932 6 63 4 77 $ 1,464 6 23 2 50 $ 3,329 6 26 3 02 $ 17,725 6 53 4 25 (11,451) 6 77 4 29 (1,447) 5 92 3 19 (12,898) 6 67 4 17 Adjustable 4,681 4 94 8 14 7,961 4 54 2 58 1,421 4 61 2 48 14,063 4 68 4 42 (5,621) 4 79 7 77 (3,311) 4 72 303 (8,932) 476 602 Japanese yen Fixed 9,331 4 79 4 54 81 5 88 2 23 3,518 0 50 1 10 12,930 3 63 3 59 (6,334) 4 93 3 85 (2,607) 2 75 3 51 (8,941) 4 29 3 75 Adjustable 4,177 568 1850 4,563 (008) 093 2,607 0 12 351 11,347 209 799 (4,610) 4 32 15 45 (3,518) 007 1 10 (8,128) 248 924 U. S. dollars Fixed 47,381 6 15 4 70 11,531 9 05 2 68 18,050 6 02 7 50 76,962 6 56 5 05 (435) 630 1 15 (42,669) 5 80 442 (43,104) 580 439 Adjustable 1,380 457 317 39,840 452 839 42,133 463 395 83,353 457 606 (12,754) 4 41 2 00 (17,516) 4 75 7 34 (30,270) 4 61 5 10 Others Fixed 19,624 723 8 12 463 5 10 053 363 708 030 20,450 7 18 781 (19,416) 7 14 7 57 (154) 6 66 5 26 (19,570) 7 13 7 55 Adjustable 245 432 1755 363 205 023 154 447 526 762 327 681 (397) 5 83 12 83 (363) 3 33 0 30 (760) 4 64 6 85 Total Fixed 89,268 6 32 5 44 13,539 25,260 128,067 6 36 5 23 (37,636) (46,877) (84,513) 6 08 5 02 Adjustable 10,483 5 17 11 83 52,727 46,315 109,525 432 605 (23,382) (24,708) (48,090) 4 28 6 00 Principal at face value 99,751 620 6 11 5,248 (10) 104,989 541 Net unamor- tizedpremium 43 59 113 215 FAS 133 Adjustment 45 (544) (125) (624) Total $99,839 $ 4,763 $104,580 a Currency swap agreements include cross-currency interest rate swaps b At June 30, 2001, the average repncingpenod of the net currency obligationsfor adjustable rate borrowings was three months c Effective January 1, 1999, the euro was introduced For reporting purposes, amounts in the twelve national currencies that are considered national currency units of the euro have been aggregated with the euro and reported as euro in both the current and pnor year IBRD FINANCIAL STATEMENTS JUNE 30, 2001 61 Medium- and Long-term Borrowings and Swaps at June 30, 2000 In millions of US dollars equwvalent Currency Interest rate Direct borrowings swap agreements' swap agreements Net currency obligations Wgtd Wgtd Notional Wgtd Wgtd avg Average Amount avg Average amount avg Average Amount avg Average Currency/ cost matunty payable cost maturty payable cost matunty payable cost matutyun Rate type Amount (96) (years) (receivable) (09) (years) (receivable) (%) (years) (receivable) (%) (years) Euro' Fixed $15,446 674 528 $ 2,944 711 1 66 $ 3,731 638 3.51 $22,121 673 450 (14,078) 6 92 4 64 (1,591) 5 62 3 47 (15,669) 6 79 4 52 Adjustable 5,757 5 46 8 89 8,477 4 07 2 54 1,564 4 49 3 26 15,798 4 62 4 93 (6,531) 522 837 (3,711) 4.33 345 (10,242) 490 659 Japanese yen Fixed 12,334 4 97 4 82 51 4 98 1 41 4,761 0 84 1 21 17,146 3 82 3 80 (8,268) 5 05 4 14 (3,123) 2 74 4 45 (11,391) 4 42 4 22 Adjustable 2,857 3 70 1099 5,174 (022) 090 3,123 007 445 11,154 086 448 (2,805) 2 10 1157 (4,761) 012 1 21 (7,566) 086 505 U. S. dollars Fixed 45,816 6 48 5 22 13,629 9 16 3 20 15,448 5 98 7 84 74,893 6 86 5 39 (1,158) 826 109 (40,011) 593 446 (41,169) 600 437 Adjustable 1,757 6 58 4 86 38,452 6 46 6 45 39,762 6 39 4 37 79,971 6 43 5 38 (12,055) 6 46 1 84 (15,223) 6 60 7 68 (27,278) 6 54 5.10 Others Fixed 21,494 7 37 5 20 1,296 5 64 0 73 390 7 08 1.30 23,180 7 27 4 88 (21,853) 7 27 4 68 (158) 6 66 6 26 (22,011) 7 27 4 69 Adjustable 193 6 99 0 60 390 1 58 1 23 158 5 85 6 26 741 3 90 2 14 (351) 823 3 15 (390) 3 10 1 30 (741) 553 2.18 Total Fixed 95,090 653 5 17 17,920 24,330 137,340 653 497 (45,357) (44,883) (90,240) 6 25 4 45 Adjustable 10,564 5 20 8 64 52,493 44,607 107,664 5 57 5 20 (21,742) (24,085) (45,827) 5 22 5 37 Principal at face value 105,654 6 39 5 52 3,314 (31) 108,937 6 37 Net unamor- tized premium (discount) (5) 186 159 340 Total $105,649 6 39 5 52 $ 3,500 $ 128 $109,277 6 37 a Currency swap agreements include cross-currency interest rate swaps b At June 30, 2000, the average repricing period of the net currency obliganons for adjustable rate borrowings was three months c Effective January 1, 1999, the euro was introduced For reportng purposes, amounts in the twelve national currenctes that are considered national currency units of the euro have been aggregated with the euro and reported as euro in both the current and pnoryear 62 THE WORLD BANK ANNUAL REPORT 2001 Short-term Borrowings and Swaps at June 30, 2001 and June 30, 2000 In millions of US dollars equivalent 2001 2000 Interest Interest Currency rate Wgtd Currency rate Wgtd swapa swap Net avg swap' swap Net avg Currencyl Pnncipal payable payable currency cost Pnncipal payable payable currency cost Rate type outstanding (receivable) (receivable) obligationsb (%) outstanding (receivable) (receivable) obligationsb (%) Japanese yen Fixed $ - $- $- $ - - $ - $- $ 556 $ 556 0 21 Adjustable - - - - - - - - - - - - - - - (556) (556) 0 20 Polish zlotys Fixed 189 - - 189 17 36 215 - - 215 16 13 (189) _ (189) 17 36 (215) - (215) 16 13 U. S dollars Fixed 5,923 - - 5,923 3 93 3,343 - - 3,343 6 59 - (100) (100) 3 91 - (95) (95) 6 65 Adjustable 827 173 100 1,100 3 78 1,196 220 100 1,516 5 98 - - - - - (6) (6) 1 67 Total Fixed 6,112 - - 6,112 435 3,558 - 556 4,114 623 (189) (100) (289) 12 71 (215) (95) (310) 13 22 Adjustable 827 173 100 1,100 3 78 1,196 220 100 1,516 5 98 - - - - - (562) (562) 0 22 Principal at face value 6,939 (16) - 6,923 3 91 4,754 5 (1) 4,758 6 40 Net unamortized premium (discount) (21) 1 - (20) (24) 1 - (23) FAS 133 Adjust- ment - (1) () (1) - - - - Total $6,918 $ (16) $ (*) $6,902 3 91 $4,730 $ 6 $ (1) $4,735 6 40 a Currency swap agreements include cross-currency interest rate swaps b At June 30, 2001, the average reprcing penod of the net currency obligations for short-term borrowtngs was one month (one month-June 30, 2000) Less than $0 5 mtillton IBRD FINANCIAI STATEMENTS JUNE 30, 2001 63 The maturity structure of IBRD's Medium-and Long-term borrowings outstandung at June 30, 2001 and June 30, 2000 is as follows In millions In milltons Penod 2001 Penod 2000 July 1, 2001 through June 30, 2002 $17,560 July 1, 2000 through June 30, 2001 $ 14,181 July 1, 2002 through June 30, 2003 16,763 July 1, 2001 through June 30, 2002 18,431 July 1, 2003 through June 30, 2004 11,191 July 1, 2002 through June 30, 2003 17,669 July 1, 2004 through June 30, 2005 9,019 July 1, 2003 through June 30, 2004 8,408 July 1, 2005 through June 30, 2006 9,547 July 1, 2004 through June 30, 2005 9,515 July 1, 2006 through June 30, 2011 17,691 July 1, 2005 through June 30, 2010 22,568 Thereafter 17,980 Thereafter 14,882 Total $99,751 Total $105,654 The following table reflects the carrying and estimated fair values of the borrowings portfolio at June 30, 2001 and June 30, 2000 In millions 2001 2000 Carrying Value" (before FAS Adjusted 133 FAS 133 Carrying Esrimated Carrying Estimated adjustment) Adjustment valuea fair value valuea fair value Short-termni $ 6,917 $ - $ 6,917 $ 6,918 $ 4,729 $ 4,726 Medium- and long-term 99,306 45 99,351 103,372 105,042 107,045 Swaps Currency Payable 66,430 448 66,878 66,878 70,632 71,249 Receivable (61,138) (993) (62,131) (62,131) (67,126) (68,380) Interest rate 103 (125) (22) (22) 127 810 Total $111,618 $(625) $110,993 $115,015 $113,404 $115,450 a T he carrying value is net of unamortized issuance costs of borrowtngs The estimated fair values are based on quoted market undertake borrowings with similar terms and remaining prices where such prices are available Where no maturities, using the secondary market yield curve. The quoted market price is available, the fair value is esti- fair value of swaps represents the estimated cost of mated based on the cost at which IBRD could currently replacing these contracts on that date. 64 THE WORLD BANK ANNUAL REPORT 2001 NOTE E-OTHER ASSET/LIABILITY SWAPS of outstanding loans to any individual borrower The In March 2001, as part of asset/liability management, country credit risk is further managed by financial IBRD entered into a number of currency swaps to bet- incentives such as pricing loans using IBRD's own cost ter align its currency composition of Equity with that of of borrowing and partial iiterest charge waivers condi- loans A summary of IBRD's other asset/liability swaps tioned on timely payment that give borrowers self- at June 30, 2001 is presented below interest in IBRD's continued strong intermediation capacity Collectibility risk is covered by the Accumu- lated Provision for Loan Losses IBRD also uses a simu- In milwons of US dollars equivalent lation model to assess the adequacy of its equity including reserves in case a major borrower, or group of Other Asset/Liablnity Swap Agreements borrowers, stops servicing its loans for an extended Amount Weighted Average period of time Receivable Average Matunty Commercial Credit Risk: For the purpose of risk man- (payable) Cost (9'°) years) agement, IBRD is party to a variety of financial instru- U S dollars $ 726 4 85 5 72 ments, certain of which involve elements of credit risk FAS 133 Credit nsk exposure represents the maximum potential FAdJuS 133 2 accounting loss due to possible nonperformance by adjustment 2 obligors and counterparties under the terms of the con- Total amount tracts For all securities, IBRD limits trading to a list of receivable $ 728 authorized dealers and counterparties Credit risk is controlled through application of eligibility criteria and Euro $(271) 4 71 5 71 volume limits for transactions with individual counter- parties and through the use of mark-to-market collat- Japanese yen (430) 0 04 5 73 eral arrangements for swap transactions IBRD may (701) 1 85 5 72 require collateral in the form of cash or other approved FAS 133 liquid securities from individual counterparties in order adjustment * to mitigate its credit exposure As of June 30, 2001, IBRD had received collateral of $351 million in con- Total amount nection with swap agreements None of this collateral payable $(70J) has been included in the assets of IBRD In addition, IBRD has entered into master derivatives * Less than $0 5 mifionagreements which contain legally enforceable close-out # Less than $0 5 million netting provisions. These agreements may further reduce the gross credit risk exposure related to the NOTE F-CREDIT RISK swaps shown below Credit nsk with financial assets subject to a master derivatives arrangement is elimi- Country Credit Risk: This risk includes potential losses nated only to the extent that financial liabilities to the arising from protracted arrears on payments from bor- same counterparty are settled after the assets are real- rowers IBRD manages country credit risk through indi- ized Because the exposure is affected by each transac- vidual country exposure limits according to tion subject to the arrangement, the extent of the creditworthiness These exposure limits are tied to per- reduction in exposure may change substantially within formance on macroeconomic and structural policies In a short period of time following the balance sheet date addition, IBRD establishes absolute limits on the share IBRD FINANCIAL STATEMENTS JUNE 30, 2001 65 The contract value/notional amounts and credit risk exposure, as applicable, of these financial instruments at June 30, 2001 and June 30, 2000 (prior to taking into account any master denvatives or collateral arrangements that have been entered into) are given below In millions 2001 2000 INVESTMENTS - TRADING PORTFOLIO Options, futures and forwards * Long position $ 5,500 $ 805 * Short position 3,400 1,250 * Credit exposure due to potential nonperformance by counterparties * * Currency swaps * Credit exposure due to potential nonperformance by counterparties 33 77 Cross-currency interest rate swaps * Credit exposure due to potential nonperformance by counterparties 438 306 Interest rate swaps * Notional principal 12,058 13,687 * Credit exposure due to potential nonperformance by counterparties 16 3 BORROWING PORTFOLIO Currency swaps * Credit exposure due to potential nonperformance by counterparties 2,845 3,863 Interest rate swaps * Notional principal 71,685 69,625 * Credit exposure due to potential nonperformance by counterparties 1,169 869 OTHER ASSET/LIABILITY Currency swaps * Credit exposure due to potential nonperformance by counterparties 36 * Less than $0 5 million NOTE G-RETAINED EARNINGS, ALLOCA- $166 million to the Pension Reserve, representing the TIONS AND TRANSFERS difference between actual funding of the Staff Retire- Retained Earnings: Retained Earnings comprises the ment Plan (SRP) and its accounting income for the fis- following elements at June 30, 2001 and June 30, cal year 2000 2000 On September 27, 2000, the Board of Governors approved the following transfers out of unallocated Net Income an amount equivalent to $320 million in SDRs In mzllwns (valued at June 30, 2000) to IDA, $250 million to the 2001 2000 Heavily Indebted Poor Countnes (HIPC) Debt Initia- tive Trust Fund, $35 milhon to the Trust Fund for Kos- Special reserve $ 293 $ 293 ovo, and $30 million for capacity building in Africa. General reserve 17,223 16,109 The remaining $76 million was allocated to Surplus Of the $320 million in SDRs valued at June 30, 2000 Pension reserve 715 549 that was approved for transfer to IDA, $300 million is Surplus 131 85 to be drawn down in fiscal year 2005; the remaining $20 million was transferred in October 2000 as a reim- Unallocated net income 1,489 1,991 bursement of IDA's share of the fiscal year 2000 cost of Total $19,851 $19,027 implementing the Strategic Compact of IBRD and IDA. On April 30, 2001, the Board of Governors approved a On August 1, 2000, the Executive Directors allocated transfer from Surplus in the amount of $30 million to $1,114 million of the net income earned in the fiscal the Trust Fund for the Federal Republic of Yugoslavia. year ended June 30, 2000 to the General Reserve and 66 THE WORLD BANK ANNUAL REPORT 2001 The aggregate transfers and amounts payable for these Board of Governors-approved transfers at June 30, 2001 and June 30, 2000 are included in the following table In millions of US dollars equivalent Fiscal Year 2001 AmountPayable Tra nsfers from at June 30 Aggregate Transfers Unallocated Transfers to through June 30, 2000 Net Income Surplus 2001 2000 International Development Association a $6,435 $320 $- $ 896 $650 Debt Reduction Facility for IDA-only Countries 300 - - 84 81 Trust Fund for Gaza and West Bank 380 - - 13 30 Heavily Indebted Poor Countries Debt Initiative Trust Fund 1,050 250 - 100 100 Capacity building in Africa 30 30 - Trust Fund for Kosovo 25 35 - Trust Fund for East Timor 10 - - Trust Fund for Federal Republic of Yugoslavia - - 30 - _ $1,093 $861 a All amounts are approved in an equivalent amount of SDRs NOTE H-ADMINISTRATIVE EXPENSES, CON- Administrative Expenses for the fiscal year ended June TRIBUTIONS TO SPECIAL PROGRAMS, AND 30, 2001 are net of the share of administrative expenses OTHER INCOME charged to IDA of $551 million ($549 million-June In March 1997, the Executive Directors approved a 30, 2000, $518 million-June 30, 1999) multiyear program of institutional renewal to improve Contributions to special programs represent grants for IBRD's and IDAs business processes, products and ser- agricultural research, and other developmental activi- vices, strengthen their human resources through more ties skilled and better trained staff, and achieve a higher level of development effectiveness This program IBRD recovers certain of its administrative expenses by which was in effect for three years ending June 30, billing third parties for services rendered These 2000, resulted in the termination of 723 staff at a amounts are included in Other Income For the fiscal cumulative cost of $111 million, of which $44 million years ending June 30, 2001, June 30, 2000, and June was allocated to IDA, consistent with normal cost 30, 1999, the amount of fee revenue associated with apportionment procedures applied in the calculation of administrative services is as follows IDA's share of administrative expenses Included in the total charges of $111 million are costs associated with In mllions outplacement consulting, job search assistance, train- 2001 2000 1999 ing, medical insurance plan contributions and related tax allowances. At June 30, 2001, $10 million was pay- Service fee revenue $146 $118 $116 able ($42 million-June 30, 2000). Included in these amounts are the following Fees charged to IFC 19 16 17 Fees charged to MIGA I 1 1 IBRD FINANCIAI STATEMENTS JUNE 30, 2001 67 At June 30, 2001 and June 30, 2000, the following payables (receivables) by IBRD to (from) its affiliated organiza- tions with regard to administrative services and pension and other postretirement benefits are included m Miscella- neous Assets and Accounts Payable and Miscellaneous Liabilities: In millions 2001 2000 Pension and Pension and Other Other Adminstrative Postretnrement Admiistrative Postretirement Sennces Benfits Total Sewices Beneits Total IDA $(229) $637 $408 $(215) $513 $298 IFC (26) 250 224 (25) 199 174 MIGA (3) 14 11 (3) 11 8 $(258) $901 $643 $(243) $723 $480 During fiscal year 2000, IBRD began offenng invest- included in service fee revenues noted previously At ment management services to a non-affiliated institu- June 30, 2001, the assets managed under this agree- tion. Under this arrangement, IBRD is responsible for ment had a value of $4,172 million ($5,158 millhon- managing investment account assets on behalf of this June 30, 2000) These funds are not included m the institution, and in return receives a quarterly fee based assets of IBRD. on the average value of the portfolio This fee income is NOTE I-TRUST FUNDS IBRD, alone or jointly with IDA, admLnisters on behalf global and regional programs and research and training of donors, including members, their agencies and other programs. These funds are held in trust and are not entities, funds restncted for specific uses which include included in the assets of IBRD. The trust fund assets by the cofinancing of IBRD lending projects, debt reduc- executing agent at June 30, 2001 and June 30, 2000 are tion operations, technical assistance for borrowers summarized below including feasibility studies and project preparation, 2001 2000 Total fiduciary Number of Total fiduciary Number of assets trust fund assets trust fund (In millions) accounts (In millions) accounts IBRD executed $ 864 1,577 $ 447 1,184 Recipient executed 1,977 1,349 2,088 2,093 Total $2,841 2,926 $2,535 3,277 The responsibilities of IBRD under these arrangements the fiscal year ended June 30, 2001, IBRD received $14 vary and range from services normally provided under million ($17 million-June 30, 2000 and $19 million- its own lending projects to full project implementation June 30, 1999) as fees for administering trust funds including procurement of goods and services During These fees have been recorded as Other Income 68 THE WORLD BANK ANNUAL REPORT 2001 NOTE J-PENSION AND OTHER POSTRETIRE- designated for other postretirement benefits met the MENT BENEFITS requirements for plan assets prescribed under SFAS IBRD has a defined benefit Staff Retirement Plan 106 "Employer's Accounting for Postretirement Bene- (SRP) that covers substantially all of its staff The SRP fits Other than Pensions" Accordingly, the RSBP assets also covers substantially all the staff of IFC and MIGA and liabilities were removed from the balance sheet In addition, IBRD provides other postretirement bene- As a result, the assets and liabilities designated on the fits for eligible active and retired staff through a Retired balance sheet for other postretirement benefits were Staff Benefits Plan (RSBP) and a Post-Employment reduced by $806 million and $620 million, respec- Benefits Plan (PEBP) tively The $650 million of assets that remained on the balance sheet were incorporated into Trading invest- During the fiscal year ended June 30, 1998, IBRD ments At June 30, 2001, liabilities of $129 million reviewed the status of the RSBP and PEBP accounts ($119 million-June 30, 2000) for the PEBP shown on and determined that the assets and liabilities did not the balance sheet represent pension benefits adminis- qualify for off-balance sheet accounting At June 30, tered outside the SRP 1998, the assets and liabilities were recorded on IBRD's The following table summarizes the benefit costs asso- balance sheet ciated with the SRP, RSBP, and PEBP for IBRD and Subsequently, during the first quarter of fiscal year IDA for the fiscal years ended June 30, 2001, June 30, 1999, the RSBP was modified so that some of the assets 2000, and June 30, 1999 In millions SRP RSBP PEBP 2001 2000 1999 2001 2000 1999 2001 2000 1999 Benefit Cost Service cost $ 228 $ 230 $ 186 $ 23 $ 24 $ 25 $ 8 $ 9 $ 5 Interest cost 448 391 324 52 42 36 6 9 7 Expected return on plan assets (829) (773) (738) (79) (67) (65) - - - Amortization of prior service cost 7 7 7 - - - - - - Amortization of unrecog- nized net (gain) loss (113) (121) (175) - _ _ (1) - 3 Amortization of Transition Asset (11) (11) (11) - - - Net periodic pension (income) cost $(270) $(277) $(407) $ (4) $ (1) $ (4) $13 $18 $15 I'he portion of the SRP and RSBP income related to The portion of the cost for the PEBP related to IBRD IBRD that has been included in income for the fiscal that has been included in income for the fiscal year year ended June 30, 2001 is $155 million ($166 mil- ended June 30, 2001 is $7 million ($10 million-June lion-June 30, 2000; $255 million-June 30, 1999). 30, 2000; $10 million-June 30, 1999). The balance The balance has been included as a payable to IDA has been included as a receivable from IDA IBRD FINANCIAL STATEMENTS JUNE 30, 2001 69 The following table summarizes the benefit obligations, plan assets, funded status and rate assumptions associated with the SRP, RSBP, and PEBP for the fiscal years ended June 30, 2001, June 30, 2000, and June 30, 1999 In millions SRP RSBP PEBP 2001 2000 1999 2001 2000 1999 2001 2000 1999 Benefit Obligation Beginning of year $6,951 $ 6,483 $ 5,890 $731 $662 $627 $ 89 $ 142 $ 90 Service cost 271 271 217 26 27 28 10 10 6 Interest cost 536 461 378 57 47 40 7 10 8 Employee contributions 64 64 61 6 5 5 * Amendments - - - - - - - - - Benefits paid (312) (244) (231) (20) (17) (18) (5) (4) (5) Actuarial (gain) loss (233) (84) 168 67 7 (20) 2 (69) 43 End of year 7,277 6,951 6,483 867 731 662 103 89 142 Fair value of plan assets Beginning of year 11,562 10,226 9,608 975 846 - - - - Assets transferred to the Plan - - - - - 806 - - - Employee contnbutions 64 64 61 6 5 5 - - - Actual return on assets (950) 1,516 788 (70) 141 53 - - - Employer contributions - - - 3 - - - - - Benefits paid (312) (244) (231) (20) (17) (18) - - - End of year 10,364 11,562 10,226 894 975 846 - - - Funded stattus Plan assets in excess of pro- jected benefit obligation 3,087 4,611 3,743 27 244 184 (103) (89) (142) Unrecognized net (gain) loss from past experience dif- ferent from that assumed and from changes in assumptions (1,415) (3,258) (2,713) 170 (53) 6 (26) (30) 39 Unrecognlized prior service cost 33 41 50 - - - - - - Remaining unrecognized net transition asset (26) (39) (52) - - Prepaid (accrued) pension cost $ 1,679 $ 1,355 $ 1,028 $197 $191 $190 $(129) $(119) $(103) Less than $0 5 nillion The $1,679 million prepaid SRP cost at June 30, 2001 The $197 million prepaid RSBP cost at June 30, 2001 ($1,355 million-June 30, 2000) is included in Miscel- ($191 million-June 30, 2000), is included in Miscella- laneous Assets on the balance sheet Of this amount neous Assets on the balance sheet. Of this amount $86 $815 million was attributable to IDA, IFC, and million was attributable to IDA, IFC, and MIGA ($85 MIGA ($643 million-June 30, 2000) and is included million-June 30, 2000) and is included in Accounts in Accounts Payable and Miscellaneous Liabilities on Payable and Miscellaneous Liabilities on the balance the balance sheet sheet 70 THE WORLD BANK ANNUAL REPORT 2001 Assumptions impact future benefit costs and obligations The The actuarial assumptions used are based on financial weighted-average assumptions used in determining market interest rates, past experience, and manage- expense and benefit obligations for the fiscal years ment's best estimate of future benefit changes and eco- ended June 30, 2001, June 30, 2000, and June 30, nomic conditions Changes in these assumptions will 1999 are as follows In percent SRP RSBP PEBP 2001 2000 1999 2001 2000 1999 2001 2000 1999 Discount rate 7 00 7 75 7 25 7 00 7 75 7 25 7 00 7 75 7 25 Expected return on plan assets 9 00 9 00 9 00 9 00 9 00 9 00 Rate of compensation increasea 5 00- 5 75 - 5 25 - 11 50 1225 11 75 Health care growth rates -at end of fiscal year 7 00 7 25 6 25 - to year 2011 and thereafter 5 00 5 75 5 25 a The effect of projected compensanon levels was calculated based on a scale that provides for a decreasing rate of salary increase depending on age, beginning with 11 50% (12 25%-June 30, 2000, 11 75%-June 30, 1999) at age 20 and decreasing to 5 00% (5 75%-June 30, 2000, 5 25%-June 30, 1999) at age 64 The medical cost trend rate can significantly affect the effects of a one-percentage-point change in the reported postretirement benefit income or costs and assumed healthcare cost trend rate benefit obligations The following table shows the In millions One percentage point increase One percentage point decrease Effect on total service and interest cost $ 19 $ ( 15) Effect on postretirement benefit obligation 167 (133) NOTE K-SEGMENT REPORTING income from these two countries was $939 million and Based on an evaluation of IBRD's operations, manage- $870 million ment has determined that IBRD has only one report- able segment since IBRD does not manage its NOTE L-COMPREHENSIVE INCOME operations by allocating resources based on a determi- nation of the contribution to net income from individ- Comprehensive income consists of net income and ual borrowers. In addition, given the nature of IBRD, other gains and losses affecting equity that, under gen- the risk and return profiles are sufficiently similar erally accepted accounting principles, are excluded among borrowers that IBRD does not differentiate from net income For IBRD, comprehensive income between the nature of the products or services pro- comprises the effects of the implementation of FAS vided, the preparation process, or the method for pro- 133, currency translation adjustments, and net viding the services among individual countries income These items are presented in the Statement of For fiscal year 2001, loans to each of two countries gen- Comprehensive Income erated in excess of 10 percent of loan income Loan IBRD FINANCIAI. STATEMENTS JUNE 30, 2001 71 The following tables present the changes in Accumulated Other Comprehensive Loss balances for the fiscal years ended June 30, 2001, June 30, 2000, and June 30, 1999 In mitons 2001 Total Cumulative Accumulated Cumulative Effect of Change Other fl-anslanon in Accounting Comprehensive Adjustment Pnnciple Reclassificationa Loss Balance, beginning of the fiscal year $ (641) $ - $ - $(641) Changes from period activity (535) 500 (169) (204) Balance, end of the fiscal year $(1,176) $500 $(169) $(845 In milions 2000 Total Cumulatve Accumulated Cumulative Effect of Change Other Translation in Accounting Comprehensive Adjustment Pnnciple Reclassificationa Loss Balance, beginning of the fiscal year $(637) $- $- $(637) Changes from period activity (4) - - (4) Balance, end of the fiscal year $(641) $- $- _ (__64 In milions 1999 TotaL Cumulanve Accumulated Cumulative Effect of Change Other Translation in Accountng Comprehensive Adjustment PInciple Reclassificatzona Loss Balance, beginning of the fiscal year $(960) $- $- $(960) Changes from period activity 323 - - 323 Balance, end of the fiscal year $(637) $- $- $(67) a Reclassification of FAS 133 transition adjustment to net income 72 THE WORLD BANK ANNUAL REPORT 2001 REPORT OF INDEPENDENT ACCOUNTANTS Deloitte Touche Tohmatsu (International Firm) Suite 500 sss 12th Street,N.W Washington, DC 20004-1207 Tel: (202) 897 5600 Fax: (202) 879 5309 www us.deloitte comr Deloitte Touche Tohmatsu (International Firm) President and Board of Govemors International Bank for Reconstruction and Development We have audited the accompanying balance sheets of the International Bank for Reconstruction and Development as of June 30, 2001 and 2000, including the sununary statement of loans and the statement of subscrptions to capital stock and voting power as of June 30, 2001, and the related statements of income, comprehensive mcome, changes in retained earnings, and cash flows for each of the three fiscal years in the period ended June 30, 2001. These financial statements are the responsibility of the Internatonal Bank for Reconstruction and Development's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits m accordance with auditing standards generally accepted in the United States of America and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessmg the accounting principles used and significant estmates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the International Bank for Reconstruction and Development as of June 30, 2001 and 2000, and the results of its operations and its cash flows for each of the three fiscal years m the period ended June 30, 2001 in conformity with accounting prnciples generally accepted m the United States of Amenca and International Accounting Standards. As discussed in the Summary of Significant Accounting and Related Pohlcies in the notes to the financial statements, the International Bank for Reconstruction and Development changed its method of accounting for derivative instruments to conform with Statement of Financial Accounting Standard (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activites, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133, and SFAS No. 138, Accountingfor Certain Derivative Instruments and Certain Hedging Activities. The International Bank for Reconstruction and Development has also early-adopted International Accounting Standard No. 39, Financial Instruments: Recognition and Measurement. July 30, 2001 IBRD FINANCIAL, STATEMENTS JUNE 30, 2001 73 TABLE OF CONTENTS June 30, 2001 SPECIAL PURPOSE FINANCIAL STATEMENTS OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION Statement of Sources and Applications of Development Resources 76 Statement of Income 78 Statement of Comprehensive Income 79 Statement of Changes in Retained Earnings 79 Statement of Cash Flows 80 Summary Statement of Development Credits 81 Statement of Voting Power, and Subscriptions and Contributions 85 Notes to Special Purpose Financial Statements 89 Supplementary Information on the Heavily Indebted Poor Countries Debt Initiative 102 Report of Independent Accountants on Special Purpose Financial Statements 103 On May 25, 2001, the Interim Trust Fund (ITF) was terminated, and all of its assets and liabilities were transferred to the International Development Association (IDA). Accordingly, the information in the Special Purpose Financial Statements and related notes reflect the combined results of IDA and ITF as if the transfer had been in effect for all periods presented. 75 STATEMENT OF SOURCES AND APPLICATIONS OF DEVELOPMENT RESOURCES Junze 30, 2001 and June 30, 2000 Expressed tin millions of US dollars 2001 2000 a Applications of Development Resources Net Resources Available For Development Activities Due from Banks Unrestncted currencies $ 49 $ 73 Currencies subject to restriction 19 20 68 93 Investments-Notes B and F Investments-Trading (including securntles transferred under repurchase or security lending agreements of $4,573 million-June 30, 2001, $3,106 million-June 30, 2000-Note A) 12,187 11,106 Net payable on investment securities transactions (445) (282) 11,742 10,824 Receivable from the HIPC Debt Initiative Trust Fund-Note I 647 590 Nonnegotiable, Noninterest-bearing Demand Obligations on Account of Member Subscriptions and Contributions 9,238 11,620 Receivable from the International Bank for Reconstruction and Development-Note D 896 650 Payable for HIPC Grants-Note I (70) Other Resources, Net 620 518 Total net resources available for development activities 23,141 24,295 Resources Used For Development Credits (see Summary Statement of Development Credits, Notes E, F and 1) Total development credits 107,014 107,476 Less undisbursed balance 20,442 20,833 Development credits outstanding 86,572 86,643 Less accumulated allowance for HIPC Debt Initiative 8,579 8,071 Total resources used for development credits outstanding 77,993 78,572 Total Applications of Development Resources $101,134 $102,867 76 THE WORLD BANK ANNUAL REPORT 2001 2001 2000a Sources of Development Resources Member Subscriptions and Contributions (see Statement of Voting Power, and Subscriptions and Contributions, Note C) Unrestricted $107,923 $108,415 Restricted 288 289 Subscriptions and Contributions Committed 108,211 108,704 Less subscriptions and contributions receivable and unamortized discounts on contributions-Note C 3,278 6,627 Subscriptions and Contributions Paid In 104,933 102,077 Deferred Amounts Receivable to Maintain Value of Currency Holdings (236) (233) Payments on Account of Pending Membership-Note C - 7 104,697 101,851 Transfers from the International Bank for Reconstruction and Development-Note D 6,693 6,427 Accumulated Other Comprehensive Loss-Note J (4,968) (738) Retained Deficit (see Statement of Changes in Retamed Earnings) (5,288) (4,673) Total Sources of Development Resources $101,134 $102,867 a Restated to include Intenm Trust Fund balances at June 30, 2000, see Note A The Notes to Special Purpose Financial Statements are an integral part of these Statements. IDA SPECIAI PURPOSE FINANCIAI. STATEMENTS. JUNE 30, 2001 77 STATEMENT OF INCOME For the fiscal years ended June 30, 2001, June 30, 2000 and June 30, 1999 Expressed in mtllions of US. dollars 2001 2000 a 1999 a,b Income Income from development credits-Note E $ 614 $ 619 $ 588 Income from investments, net-Note B 680 406 499 Total income 1,294 1,025 1,087 Expenses Administrative Expenses-Notes G and H 427 438 368 Amortization of dcscount on subscription advances 1 3 2 Total expenses 428 441 370 Operating Income 866 584 717 Effect of exchange rate changes on accumulated income excluding HIPC Debt Initiative (847) (289) (73) Income before HIPC Debt Initiative 19 295 644 Enhanced HIPC Frameuork-(Expenses) Income- Notes E and I Allowance for principal component of debt relief (686) (8,009) Debt service grants (101) Contribution from the HIPC Debt Initiative Trust Fund 177 601 Total net expenses for Enhanced HIPC (610) (7,408) Original HIPC Framework-Expenses-Note E Allowance for write-down on sale of development credits (24) (455) Development grants - - (154) Total expenses for Original HIPC (24) (455) (154) (Loss) Income after HIPC Debt Initiative $(615) $(7,5681 $ 490 a Restated to include Intenm Trust Fund activity for the fiscal years ended June 30, 2000 and June 30, 1999, see Note A b. Restated to include IDA accounting policy changes related to the HIPC Debt Initiative at June 30, 1999, see Note A. The Notes to Special Purpose Financial Statements are an integral part of these Statements. 78 THE WORLD BANK ANNUAL REPORT 2001 STATEMENT OF COMPREHENSIVE INCOME For the fiscal years ended June 30, 2001, June 30, 2000 and June 30, 1999 Expressed in millions of US dollars 2001 2000 a 1999 a, _ (Loss) Income after HIPC Debt Initiative $ (615) $(7,568) $490 Other Comprehensive Income-Note J Currency translation adjustment on development credits (4,230) (532) 195 Total other comprehensive (loss) income (4,230) (532) 195 Comprehensive (Loss) Income $(4,845) $(8,100) $685 a Restated to include Interim Trust Fund activity forftscal year ended June 30, 2000 and June 30, 1999, see Note A b Restated to include IDA accountingpolncy changes related to the HIPC Debt Initiative at June 30, 1999, see Note A STATEMENT OF CHANGES IN RETAINED EARNINGS For the fiscal years ended June 30, 2001 and June 30, 2000 Expressed in millions of US dollars 2001 2000 a Balance at Activity Balance at Balance at Actitity Balance at begnning of during the end of the beginning of dunng the end of the the fiscal year fiscal year fiscal year the fiscal year fiscal year fiscal year Allowance for Enhanced HIPC $(8,009) $(686) $(8,695) $ $(8,009) $(8,009) Debt Service Grants (101) (101) _ _ Contribution for Enhanced HIPC from HIPC Debt Initiative Trust Fund 601 177 778 - 601 601 Original HIPC (777) (24) (801) (322) (455) (777) Accumulated income excluding HIPC Debt Initiative 3,512 19 3,531 3,217 295 3,512 Total Retained (Deficit) Earnings $(4,6731 $(615) $(5,288) $2,895 $(7568) $4,673) a Restated to include Intenm 'rnust Fund balances at June 30, 2000, see Note A The Notes to Special Purpose Financial Statements are an integral part of these Statements. IDA SPECIAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 79 STATEMENT OF CASH FLOWS For the fiscal years ended June 30, 2001, June 30, 2000 and June 30, 1999 Expressed in millions of US dollars 2001 2000 a 1999 a, b Cash Flows from Development Activities Cash Flows from Development Credit Activities Development credit disbursements $(5,492) $(5,177) $(6,023) Development credit principal repayments 997 920 814 Development credits sold to the HIPC Debt Initiative Trust Fund 133 354 84 Reimbursement received for principal repayments forgiven 105 11 - Net cash used in development credit activities (4,257) (3,892) (5,125) Cash Flows from Grant Activities Development grant disbursements - - (149) Debt service grant disbursements (31) - - Reimbursements received from the HIPC Debt Initiative Trust Fund for debt service grants disbursed 15 - - Net cash used in grant activities (16) - (149) Net cash used in development activities (4,273) (3,892) (5,274) Cash Flows from Member Subscriptions and Contributions 5,232 5,320 5,393 Cash Flows from the International Bank for Reconstruction and Development Transfers 19 50 - Cash Flows from Operating Activities Operating income 866 584 717 Net assets previously designated for other postretirement benefits received from the International Bank for Reconstruction and Development - - 76 Adjustments to reconcile operating income to net cash provided by operating activities Amortization of discount on subscription advances 1 3 2 Net changes in other development resources (113) (142) (183) Net cash provided by operating activities 754 445 612 Effect of exchange rate changes on unrestricted cash and liquid investments (838) (257) (84) Net Increase in Unrestricted Cash and Liquid Investments 894 1,666 647 Unrestricted Cash and Liquid Investments at Beginning of the Fiscal Year 10,897 9,231 8,584 Unrestricted Cash and Liquid Investments at End of the Fiscal Year $11,791 $10,897 $9,231 Composed of Due from banks-Unrestricted currencies $ 49 $ 73 $ 80 Investments 11,742 10,824 9,151 $11,791 $10,897 $9,231 Supplemental Disclosure (Decrease) increase in ending balances of development credits outstanding, resulting from exchange rate fluctuations $(4,230) $ (532) $ 195 Wnte-down on sale of development credits-Original HIPC (97) (382) - a Restated to include Interim Trust Fund activity for the fiscal years ended June 30, 2000 and June 30, 1999, see Note A. b. Restated to include IDA accounting policy changes related to the HIPC Debt Initiative at June 30, 1999, see Note A. The Notes to Special Purpose Financial Statements are an integral part of these Statements. 80 THE WORLD BANK ANNUAL REPORT 2001 SUMMARY STATEMENT OF DEVELOPMENT CREDITS June 30, 2001 Expressed in millhons of US dollars Percentage of Total Undisbursed Development development development development credits credits Borrower or guarantor credzts credits outstanding outstanding Afghanistan $ 75 $ - $ 75 0 09% Albania 512 162 350 0 40 Angola 259 39 220 0 25 Armenia 577 174 403 0 47 Azerbaijan 408 185 223 0 26 Bangladesh 7,707 1,367 6,340 7 33 Benin 666 95 571 0 66 Bhutan 57 29 28 0 03 Bolivia 1,456 355 1,101 1 27 Bosnia and Herzegovina 649 215 434 0 50 Botswana 9 - 9 0 01 Burkina Faso 784 204 580 0 67 Burundi 644 64 580 0 67 Cambodia 379 161 218 0 25 Cameroon 942 191 751 0 87 Cape Verde 139 40 99 0 11 Central African Republic 388 13 375 0 43 Chad 654 145 509 0 59 Chile 7 - 7 0 01 China 9,206 652 8,554 9 88 Colombia 7 - 7 0 01 Comoros 105 34 71 0 08 Congo, Democratic Republic of 1,150 - 1,150 1 33 Congo, Republic of 155 5 150 0 17 Costa Rica 2 - 2 * C6ted'lvoire 1,605 289 1,316 1 52 Djibouti 88 37 51 0 06 Dominica 16 3 13 0 02 Dominican Republic 14 - 14 0 02 Ecuador 20 - 20 0 02 Egypt, Arab Republic of 1,634 390 1,244 1 44 El Salvador 16 - 16 0 02 Equatorial Guinea 45 - 45 0 05 Eritrea 299 168 131 0 15 Ethiopia 3,074 1,170 1,904 2.20 Gambia, The 215 49 166 0 19 Georgia 585 237 348 0 40 Ghana 3,424 387 3,037 3 51 Grenada 14 5 9 0 01 Guinea 1,040 90 950 1 10 Guinea-Bissau 252 33 219 0 25 Guyana 196 22 174 0 20 Haiti 471 4 467 0 54 Honduras 1,088 260 828 0 96 IDA SPECIAL PURPOSE FINANCIAL SI'ATEMENTS JUNE 30, 2001 81 SUMMARY STATEMENT OF DEVELOPMENT CREDITS (cont nued) June 30, 2001 Expressed in millions of US dollars Percentage of Total Undtsbursed Development development development development credits credits Borrower or guarantor credits credits outstanding outstanding India $22,466 $3,653 $18,813 21 74% Indonesia 1,075 349 726 0 84 Jordan 56 - 56 0 06 Kenya 2,656 426 2,230 2 58 Korea, Republic of 63 - 63 0 07 Kyrgyz Republic 539 168 371 0 43 Lao People's Democratic Republic 537 131 406 0 47 Lesotho 252 72 180 0 21 Libena 98 - 98 0 11 Macedonia, former Yugoslav Republic of 304 58 246 0 28 Madagascar 1,893 523 1,370 1.58 Malawi 1,792 188 1,604 1 85 Maldives 57 13 44 0 05 Mali 1,252 289 963 1.11 Mauritania 569 105 464 0 54 Mauritius 13 - 13 0 02 Moldova 144 40 104 0 12 Mongolia 249 113 136 0.16 Morocco 26 - 26 0 03 Mozambique 1,154 404 750 0 87 Myanmar 694 - 694 0 80 Nepal 1,222 111 1,111 1 28 Nicaragua 961 315 646 0 75 Niger 867 150 717 0.83 Nigeria 863 245 618 0.71 Pakistan 4,581 458 4,123 4 76 Papua New Guinea 89 - 89 0.10 Paraguay 27 - 27 0 03 Philippines 218 15 203 0 24 Rwanda 880 176 704 0.81 St Kitts and Nevis I - 1 * St Lucia 17 6 11 0 01 St Vincent and the Grenadines 9 2 7 0 01 Samoa 58 11 47 0 05 Sao Tome and Principe 69 9 60 0 07 Senegal 1,968 643 1,325 1.53 Sierra Leone 410 41 369 0 43 Solomon Islands 41 4 37 0.04 Somalia 386 - 386 0 45 Sn Lanka 1,827 263 1,564 1 81 Sudan 1,136 - 1,136 1.31 Swaziland 5 - 5 0 01 Syrian Arab Republic 29 - 29 0 03 Tajikistan 242 100 142 0 16 Tanzania 3,092 565 2,527 2.92 Thailand 88 - 88 0 10 Togo 668 86 582 0.67 82 THE WORLD BANK ANNUAL REPORT 2001 Percentage of Total Undisbursed Development development development development credits credits Borrower or guaranrtor credits credits outstanding outstanding Tonga $ 4 $ - $ 4 I% Tunisia 38 - 38 0 04 Turkey 98 - 98 0.11 Uganda 2,767 666 2,101 2 43 Vanuatu 16 4 12 0 01 Vietnam 2,907 1,760 1,147 1 33 Yemen, Republic of 1,610 394 1,216 1 41 Zambia 2,232 441 1,791 2 07 Zimbabwe 577 158 419 0 48 Subtotal members 6 106,925 20,429 86,496 99 91 West African Development Bank 2 55 8 47 0 05 Caribbean Development Bank 3 24 - 24 0 03 Subtotal regional development banks 79 8 71 0 08 Afrncan Trade Insurance Agency 4 5 5 - - Other5 5 - 5 001 Total-June 30, 2001 6 $107,014 $20,442 $86,572 100 00% Total-June 30, 2000 7 $107,476 $20,833 $86,643 * Indicates amounts less than $0 05 million or less than 0 005 per cent NOTES I Of the undisbursed balance at June 30, 2001, IDA has entered into irrevocable commitments to dtsburse $209 million ($153 million-June 30, 2000). 2 These development credtts are for the benefit of Benin, Burkina Faso, C6te d'Ivoire, Malt, Niger, Senegal, and Togo 3 These development credits are for the benefit of Grenada and terrtones of the United Kingdom (Associated States and Dependencies) in the Caribbean region 4. Represents development credit extendedfor the benefit of Burundi, Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia, to the African Trade Insurance Agency (ATI) as the tmplementing agency 5 Represents development credits made at a time when the authonrtes on Taiwan represented China in IDA (pnor to May 15, 1980). 6 May dzffer from the sum of individual figures shown because of rounding 7 Restated to include Intenm Trust Fund balances at June 30, 2000. The Notes to Special Purpose Financial Statements are an integral part ofthese Statements. IDA SPECIAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 83 SUMMARY STATEMENT OF DEVELOPMENT CREDITS (contlnued) June 30, 2001 Expressed in millions of US dollars Maturity Structure of Development Credits Outstanding Period July 1, 2001 through June 30, 2002 $ 1,683 July 1, 2002 through June 30, 2003 1,509 July 1, 2003 through June 30, 2004 1,681 July 1, 2004 through June 30, 2005 1,865 July 1, 2005 through June 30, 2006 2,051 July 1, 2006 through June 30, 2011 13,170 July 1, 2011 through June 30, 2016 16,513 July 1, 2016 through June 30, 2021 18,034 July 1, 2021 through June 30, 2026 15,847 July 1, 2026 through June 30, 2031 10,160 July 1, 2031 through June 30, 2036 3,751 July 1, 2036 through June 30, 2041 308 Total $86,572 The Notes to Special Purpose Financial Statements are an integral part of these Statements. 84 THE WORLD BANK ANNUAL REPORT 2001 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS June 30, 2001 Expressed in millions of US dollars Subscnptions and Number of Percentage of contnbutions Member votes 2 total votes committed 2 Part I Members Australia 171,336 1 32% $ 1,810 0 Austria 88,738 0 68 896.1 Belgium 154,450 1 19 1,759 0 Canada 388,290 2 99 4,767 5 Denmark 132,908 1 02 1,457 3 Finland 80,693 0 62 690 7 France 561,248 4 32 7,468 5 Germany 913,474 7 04 12,309 0 Iceland 30,319 0 23 23 2 Ireland 38,673 0.30 140 4 Italy 389,670 3.00 4,410 0 Japan 1,414,996 10.90 24,078 1 Kuwait 78,672 0 61 707 1 Luxembourg 32,849 0.25 65 4 Netherlands 291,388 2 25 4,026 4 New Zealand 37,881 0 29 129 2 Norway 133,646 1 03 1,371 3 Portugal 32,923 0 25 56 7 Russian Federation 35,887 0 28 173 3 South Africa 36,620 0 28 93 2 Spain 81,866 0.63 649 1 Sweden 258,855 1 99 2,770 6 Switzerland 3 132,364 1 02 1,398 6 United Arab Emirates 1,367 0 01 5 6 United Kingdom 641,302 4 94 8,013 1 United States 1,865,737 14 38 25,841 8 Subtotal Part I Members 4 8,026,152 61 85 105,111 0 Part H Members Afghanistan 13,557 0 10 1 3 Albania 28,789 0.22 03 Algena 27,720 0 21 5 1 Angola 48,362 0 37 7.9 Argentina 134,439 1 04 70 3 Armenia 2,717 0.02 0 5 Azerbaijan 644 0 01 09 Bangladesh 73,545 0.57 7 2 Barbados 29,645 0 23 0.6 Belize 1,788 0.01 0 2 Benin 10,176 0 08 0 6 Bhutan 16,929 0 13 0 1 Bolivia 36,363 0.28 1 4 Bosnia and Herzegovina 19,571 0.15 2 3 Botswana 26,854 0 21 1 6 Brazil 224,016 1.73 301 5 Burkina Faso 21,166 0 16 0 7 Burundi 25,706 0 20 1 0 IDA SPECIAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 85 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS (continued) June 30, 2001 Expressed in millions of U.S dollars Subscriptions and Number of Percentage o2 contributions Member votes 2 total votes committed 2 Cambodia 10,322 0.08% $ 1 3 Cameroon 22,684 0.17 1 3 Cape Verde 4,916 0 04 0.1 Central African Republic 13,620 0 11 0 6 Chad 10,990 0 08 0.6 Chile 31,782 0 25 4.5 China 247,345 1 91 40 8 Colombia 43,080 0 33 24 4 Comoros 13,141 0 10 0 1 Congo, Democratic Republic of 12,164 0 09 3.8 Congo, Republic of 8,385 0 06 0 6 Costa Rica 12,480 0 10 0.3 C6te d'Ivoire 23,069 0 18 1 3 Croatia 36,430 0 28 5 5 Cyprus 33,817 0 26 1 1 Czech Republic 60,645 0 47 35 3 Djibouti 532 * 0 2 Dominica 16,749 0 13 0.1 Dominican Republic 27,780 0.21 0 6 Ecuador 32,886 0 25 0 9 Egypt, Arab Republic of 60,884 0 47 6 8 El Salvador 6,244 0.05 0.4 Equatorial Guinea 6,167 0 05 0 4 Eritrea 25,295 0 20 0 1 Ethiopia 23,053 0 18 0 7 Fiji 9,423 0 07 0.7 Gabon 2,093 0 02 0 6 Gambia, The 19,444 0.15 0 4 Georgia 25,723 0.20 0 9 Ghana 23,831 0 18 3 0 Greece 55,946 0 43 40 3 Grenada 20,627 0 16 0 1 Guatemala 30,750 0 24 0 5 Guinea 28,087 0 22 1 3 Guinea-Bissau 6,790 005 0 2 Guyana 20,860 0.16 1 0 Haiti 22,271 0 17 1 0 Honduras 24,270 0.19 0 4 Hungary 98,029 0.76 45 3 India 405,142 3 12 55 7 Indonesia 115,860 0.89 14 3 Iran, Islamic Republic of 15,455 0 12 5 7 Iraq 9,407 0 07 1.0 86 THE WORLD BANK ANNUAL REPORT 2001 Subscnptions and Number of Percentage of contributions Member votes 2 total votes committed 2 Israel 42,408 0 33% $ 14 4 Jordan 24,865 0 19 0 4 Kazakhstan 806 0 01 1 9 Kenya 33,882 0 26 2 2 Kiribati 6,477 0 05 0 1 Korea, Republic of 66,818 0 52 301 7 Kyrgyz Republic 2,700 0 02 0 5 Lao People's Democratic Republic 16,967 0 13 0 6 Latvia 614 0 7 Lebanon 8,562 0 07 0 6 Lesotho 28,677 0 22 0 2 Libena 22,467 0 17 1 0 Libya 7,771 0.06 1 3 Macedonia, former Yugoslav Republic of 18,707 0 14 1 0 Madagascar 11,600 0 09 1 2 Malawi 31,515 0 24 1 0 Malaysia 48,929 0 38 3 5 Maldives 27,547 0 21 0 1 Mali 24,808 0.19 1 2 Marshall Islands 4,902 0.04 * Mauritania 15,285 0 12 0 7 Mauritius 34,730 0 27 1 2 Mexico 99,997 0 77 137 2 Micronesia, Federated States of 18,424 0 14 * Moldova 612 * 0.7 Mongolia 24,389 0 19 0 3 Morocco 57,674 0 44 4 8 Mozambique 12,217 0.09 1 7 Myanmar 44,697 0 34 2 9 Nepal 31,410 0 24 0 7 Nicaragua 29,845 0 23 0 4 Niger 19,302 0 15 0 7 Nigeria 12,657 0 10 4 3 Oman 26,927 0 21 1 3 Pakistan 116,830 0.90 13 4 Palau 504 Panama 7,550 0.06 * Papua New Guinea 15,750 0.12 1.1 Paraguay 14,119 0 11 0 4 Peru 20,428 0 16 2 2 Philippines 16,583 0 13 6 4 Poland 296,927 2 29 58 2 Rwanda 20,312 0 16 1.0 St Kitts and Nevis 7,888 0 06 0 2 St Lucia 24,503 0 19 0 2 St Vincent and the Grenadines 2,214 002 0 1 Samoa 15,761 0 12 0.1 Sao Tome and Principe 6,414 0.05 0 1 Saudi Arabia 458,383 3 53 2,158 2 Senegal 35,224 0 27 2 2 Sierra Leone 14,367 0 11 1 0 Slovak Republic 38,250 0 29 12 6 Slovenia 18,956 0 15 3 0 IDA SPECIAI PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 87 STATEMENT OF VOTING POWER, AND SUBSCRIPTIONS AND CONTRIBUTIONS (continued) June 30, 2001 Expressed in millions of U.S dollars Subscriptions and Number of Percentage of contributions Member votes2 total votes committed2 Solomon Islands 518 *% $ 0 1 Somalia 10,506 0 08 1 0 Sn Lanka 51,188 0 39 4 0 Sudan 22,484 0 17 1 3 Swaziland 12,773 0 10 0 4 Syrian Arab Republic 10,351 0.08 1 2 Tajikistan 20,568 0.16 0 5 Tanzania 35,867 0 28 2.2 Thailand 48,488 0.37 4.1 Togo 23,243 0 18 1 0 Tonga 14,144 0 11 0 1 Trinidad and Tobago 770 0 01 1 6 Tunisia 2,793 002 1 9 Turkey 87,904 0.68 112.4 Uganda 23,121 0.18 2.2 Uzbekistan 746 001 1 5 Vanuatu 13,821 0 11 0 2 Vietnam 15,454 0 12 1 9 Yemen, Republic of 37,025 0 29 2.1 Yugoslavia, Federal Republic of 25,109 0 19 6 8 Zambia 28,568 0 22 3 4 Zimbabwe 15,057 0 12 5.0 Subtotal Part 11 Members 4 4,951,104 38 15 3,613 1 Total-June 30, 2001 3,4 12,977,256 100.00% $108,724.1 Total-June 30, 2000 3 12,268,862 $109,216.35 * Indicates amounts less than $0.05 mtllion or less than 0 005 percent NOTES I. See Notes to Special Purpose Financial Statements-Note A for an explanation of the two categories of membership. 2 See Notes to Special Purpose Financial Statements-Note A for a bnef descrption of the termination of the Interim Trust Fund 3 $512.3 million of Switzerland's subscription and contributions have not been included in the Statement of Sources and Applications of Development Resources at June 30, 2001 and June 30, 2000 sznce this represents the difference between the total cofinancing grants of $580.1 million provtded by Switzerland directly to IDA borrowers as cofinancing grants between the fourth and the ninth replenishments of IDA resources, and the July 1992 contribution by Switzerland of $67 8 million 4. May differ from the sum of individual figures shown because of rounding 5 Restated to include Interim Trust Fund balances at June 30, 2000. The Notes to Special Purpose Financial Statements are an integral part of these Statements. 88 THE WORLD BANK ANNUAL REPORT 2001 NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS NOTE A-ORGANIZATION, OPERATIONS AND The Board of Governors, in the ITF resolution, autho- SIGNIFICANT ACCOUNTING AND RELATED rized the allocation of voting rights in IDA to ITF con- POLICIES tributors on account of their contributions upon Purpose and Affiliated Organizations termination The ITF resolution provided that voting rights were to be calculated "on the basis of the then- The International Development Association (IDA) is current voting rights system" Accordingly, upon the an international organization established on September final decision to terminate ITF, voting rights, including 24, 1960 IDA's main goal is reducing poverty through preemptive rights under Article 111, Section l(c) of promoting economic development m the less devel- IDA's Articles of Agreement, were calculated and han- oped areas of the world included in IDA's membership, dled in accordance with the same model and proce- by providing financing on concessionary terms. IDA has dures as used in regular replenishments three affiliated organizations, the International Bank for Reconstruction and Development (IBRD), the Intema- Summary of Significant Accounting and Related tional Finance Corporation (IFC), and the Multilateral Policies Investment Guarantee Agency (MIGA) Each of these Due to the nature and organization of IDA, these finan- other organizations is legally and financially indepen- cial statements have been prepared for the specific pur- dent from IDA, with separate assets and liabilities, and pose of reflecting the sources and applications of IDA is not liable for their respective obligations The member subscriptions and contnbutions and other principal purpose of IBRD is to promote the economic development resources These financial statements are development of its member countries, primarily by pro- not intended to be a presentation in accordance with vidmg loans and related technical assistance for specific accounting pnncsples generally accepted in the United projects and for programs of economic reform m devel- States of Amenca or with International Accounting oping member countries. IFC's purpose is to encourage Standards These special purpose financial statements the growth of productive private enterprises in its have been prepared to comply with Article VI, Section member countries through loans and equity invest- I1(a) of the Articles of Agreement of IDA, and are pre- ments in such enterprises without a member's guaran- pared in accordance with the accounting policies out- tee MIGA was established to encourage the flow of hned below investments for productive purposes among member Th countries and, in particular, to help developing member Te preparation of these special purpose financial state- countries by providig guarantees against noncommer- ments requires management to make estimates and cial risks for foreign ivestment in Its developing mem- assumptions that affect the reported amounts of assets her countries and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the Termination of the Interim Trust Fund reported amounts of revenue and expenses during the The Interim Trust Fund (ITF) was established by IDA's reporting period. Actual results could differ from these Board of Governors on June 26, 1996 as part of the estimates Significant judgements have been used in Eleventh Replenishment, and became effective on the computation of estimated fair values of develop- November 14, 1996. The ITF was a trust fund adminis- ment credits and allowances for the HIPC Debt Initia- tered by IDA to help fund operations approved during tive the period July 1, 1996 to June 30, 1997, as well as cer- Reclassifications tamn operations approved after July 1, 1997. Certain reclassifications of the prior years' information With the agreement of a majority of ITF contributors have been made to conform to the current year's pre- representing a majority of the aggregate ITF contribu- sentation In prior years, the Interim Trust Fund was tions, the Executive Directors on May 25, 2001 presented on a stand alone basis and therefore, such decided to termmate the ITF. Upon termination, ITF assets and liabilities were not included as part of IDA's credits became part of IDA's regular lending portfolio, financial statements The prior years' IDA balances and and all of ITF's assets and liabilities were transferred to activity have been restated to include the Interim Trust IDA as shown on the following table of ITF Sources Fund at June 30, 2000 and June 30, 1999 due to the and Applications of Development Resources as of May Interim Trust Fund termination discussed above 31, 2001 and June 30, 2000 prior to the transfer IDA SPECIAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 89 The effect has been to increase the following in IDA's accounts In millions of US dollars equivalent May 31, 2001 June 30, 2000 (Prtor to transfer) Statement of Sources and Applications of Development Resources Applications of Development Resources Due from banks-Unrestricted currencies $ - $ 10 Investments-Trading 1,441 1,346 Receivable from the HIPC Debt Initiative Trust Fund 10 17 Nonnegotiable, noninterest-bearing demand obligations on account of contributions 233 711 Other Resources, net - 2 Net resources available for development activities 1,684 2,086 Total Interim Fund Credits 2,518 2,680 Less undisbursed balance 1,431 1,889 Interim Fund Credits outstanding 1,087 791 Less accumulated allowance for HIPC Debt Initiative 54 51 Resources used for Interim Fund Credits outstanding 1,033 740 Total applications of development resources $2,717 $2,826 Sources of Development Resources Subscriptions and Contributions paid in $2,738 $2,777 Accumulated other comprehensive income (72) (20) Retained earnings 51 69 Total sources of development resources $2,717 $2,826 Basis of Accounting translation adjustments are shown in the Statement of IDA's special purpose financial statements are prepared Income on the accrual basis of accounting That is, the effects of Member Subscriptions and Contributions transactions and other events are recognized when they occur (and not as cash or its equivalent is received or Recognition paid) and are recorded in the accounting records and Member Subscriptions and Contributions committed reported in the financial statements of the periods to for each IDA replenishment are recorded in full as Sub- which they relate scriptions and Contributions Committed upon effec- tiveness of the relevant replenishment Replenishments become effective when IDA has received Instruments IDA's special purpose financial statements are of Commitments (loCs) from members for subscrip- expressed in terms of U S dollars solely for the purpose tions and contributions of a specified portion of the full of summarizing IDA's financial position and the results replenishment Amounts not yet paid in, at the date of of its operations for the convenience of its members effectiveness, are recorded as Subscriptions and Contri- and other interested parties butions Receivable and shown as a reduction of Sub- IDA is an international organization which conducts its scriptions and Contrbutions Committed These operations in Special Drawing Rights (SDRs) and US receivables come due throughout the replenishment dollars Applications of development resources and period (generally three years) in accordance with an sources of development resources are translated at mar- agreed maturity schedule The actual payment of soures e r r . receivables when they become due from certain mem- kcet exchange rates in effect at the end of the accounting esi odtonluo h epctv ebrsbd period, except Member Subscriptions and Contribu- bers IS conditional upon the respective member's bud- tions which are translated in the manner described getary appropriation processes. below. Income and expenses are translated at either the The Subscriptions and Contributions Receivable are market exchange rates in effect on the dates of income settled through payment of cash or deposit of nonnego- and expense recognition, or at an average of the market tiable, noninterest-bearing demand notes. The notes exchange rates in effect durng each month Translation are encashed by IDA as provided in the relevant replen- adjustments relating to the revaluation of development ishment resolution over the disbursement penod of the credits denominated in SDRs are charged or credited to credits committed under the replenishment Accumulated Other Comprehensive Income Other 90 THE WORLD BANK ANNUAL REPORT 2001 In certain replenishments, donors have had the option Executive Directors of IDA have decided, with effect of paying all of their subscription and contnbution on that date and until such time as the relevant provi- amounts in cash before they become due, and thereby sions of the Articles of Agreement are amended, that receiving discounts In addition, some replenishment the words "U S dollars of the weight and fineness in arrangements have incorporated an accelerated encash- effect on January 1, 1960" in Article 11, Section 2(b) of ment schedule In these cases, IDA and the donor agree the Articles of Agreement of IDA are interpreted to that IDA will invest the cash and retain the income mean the SDR introduced by the International Mone- The related subscription and contribution is recorded at tary Fund as the SDR was valued in terms of U S dol- the full undiscounted amount The discount is recorded lars immediately before the introduction of the basket as unamortized discounts on contributions (a reduction method of valuing the SDR on July 1, 1974, such value of Subscnptions and Contributions Committed) and being equal to $1 20635 for one SDR (the 1974 SDR), amortized over the projected encashment period. and have also decided to apply the same standard of Under the provisions governing replenishments, IDA value to amounts expressed in 1960 dollars in the rele- must encash the notes or similar obligations of contrib- vant resolutions of the Board of Governors uting members on an approximately pro rata basis As The subscriptions and contributions provided through discussed in the previous paragraph, donors sometimes the Third Replenishment are expressed on the basis of contribute resources on an advanced or an accelerated the 1974 SDR Prior to the decision of the Executive basis IDA holds these resources until they become Directors, IDA had valued these subscriptions and con- available for disbursement on a pro rata basis tributions on the basis of the SDR at the current mar- Transfers to IDA from IBRD are recorded under ket value of the SDR Sources of Development Resources and are receivable The subscriptions and contributions provided under the upon approval by IBRD's Board of Governors Fourth Replenishment and thereafter are expressed in For the purposes of its financial resources, the member- members' currencies or SDRs and are payable in mem- shipof DA i diidedint twocatgone. () Pat I bers' currencies Beginning July 1, 1986, subscriptions ship of IDA is divided into two categonles. (1) Part I adcnrbtosmd vlal o lbreetI members, which make payments of subscriptions and and contributions made available for disbursement in contributions provided to IDAinconvertiblecuffenc cash to IDA are translated at market exchange rates in which may be freely used or exchanged by IDA cnits effect on the dates they were made available Prior to wheratich s may be f areel usd omex ger, d byID init that date, subscriptions and contributions which had operations and (2) Part of members, which make pay- been disbursed or converted into other currencies were frens on percenteof thei i rsbcipins ninety translated at market exchange rates in effect on dates of freely convertblae currencies, and tne remanlng nmiety disbursement or conversion Subscriptions and contri- pebscrcentiof thi intia u tions, rnd allradditn butions not yet available for disbursements are trans- subscriptlons and contributlons i their own currencies lated at market exchange rates in effect at the end of or in freely convertible currencies Certain Part 11 mem- thaconigprd bers provide a portion of their subscriptions and contri- butions in the same manner as mentioned in (1) above. Article IV, Section 2(a) and (b) of IDA's Articles of IDA's Articles of Agreement and subsequent replenish- Agreement provides for maintenance of value pay- ment agreements provide that the currency of any Part ments on account of the local currency portion of the 11 member paid in by it may not be used by IDA for initial subscription whenever the par value of the mem- projects financed by IDA and located outside the tern- ber's currency or its foreign exchange value has, in the tory of the member except by agreement between the opinion of IDA, depreciated or appreciated to a signifi- member and IDA. The cash paid and notes deposited in cant extent within the member's territories, so long as, nonconvertible local currencies for the subscriptions of and to the extent that, such currency shall not have Part 11 members are recorded either as currencies sub- been initially disbursed or exchanged for the currency Ject to restriction under due from banks, or as restricted of another member The provisions of Article IV, Sec- notes included under nonnegotiable, noninterest-bear- tion 2(a) and (b) have by agreement been extended to ing demand obligations on account of member sub- cover additional subscriptions and contributions of IDA scriptions and contributions Restncted notes at June through the Third Replenishment, but are not applica- 30, 2001 were $33 million ($35 million, June 30, ble to those of the Fourth and subsequent replenish- 2000). ments Valuation The Executive Directors decided on June 30, 1987 that The subscriptions and contributions provided through settlements of maintenance of value, which would the Third Replenishment are expressed in terms of result from the resolution of the valuation issue on the "U.S dollars of the weight and fineness in effect on Jan- basis of the 1974 SDR, would be deferred until the uary 1, 1960" (1960 dollars) Following the abolition of Executive Directors decide to resume such settlements gold as a common denominator of the monetary system These amounts are shown as Deferred Amounts and the repeal of the provision of the U.S. law defining Receivable to Maintain Value of Currency Holdings the par value of the U S. dollar in terms of gold, the pre-existing basis for translating 1960 dollars into cur- rent dollars or any other currency disappeared The IDA SPECIAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 91 Development Credits thereafter are denominated in SDRs; the principal All development credits are made to or guaranteed by amounts disbursed under such development credits are member governments or to the government of a terrn- to be repaid m currency amounts currently equivalent tory of a member (except for development credits to the SDRs disbursed which have been made to regional development institu- Development Grants tions for the benefit of members or territories of mem- The Eleventh and Twelfth Replenishment Resolutions bers of IDA) In order to qualify for lending on IDA authorize the use of Eleventh and Twelfth Replenish- terms, a country's per capita income must be below a metdor us of Elevent Rants certain level and the country may have only limite, or ment donor funds to finance IDA development grants no creditworthiness for IBRD lending Development in the context of the HIPC Debt Initiative. The net no creditworthiness for IBrD lending Development mincome transfers from IBRD for fiscal years 1997, 1998 credits carry a service charge of 0 75 percent and gener- ally have 35- or 40-year final maturities and a 10-year and 1999 also authorizes the use of such funds for IDA grace period for principal payments Development development grants credits are carried in the Special Purpose Fmancial Heavily Indebted Poor Countries Debt Initiative Statements at the full face amount of the borrowers' The HIPC Debt Initiative was launched in 1996 as a outstanding obligations Joint effort by bilateral and multilateral creditors to It is the practice of IDA to place in nonaccrual status all ensure that reform efforts of HIPCs would not be put development credits made to a member government or at risk by unsustainable external debt burdens As a to the government of a territory of a member if princi- part of this process, the HIPC Debt Initiative Trust pal or charges with respect to any such development Fund was established on November 7, 1996 as a legally credit are overdue by more than six months, unless separate entity It was admnistered by IDA and consti- IDA's management determines that the overdue tuted by funds of donors including the IBRD, to help amount will be collected in the immediate future In beneficiaries reduce their overall debt, including IDA addition, if loans by IBRD to a member government are debt. placed in nonaccrual status, all development credits to Under the Original Framework of the Initiative, eligible that member government will also be placed in nonac- countries received rehef on IBRD and IDA debt crual status by IDA On the date a member's develop- through three mechamsms: (i) partial financing of lend- ment credits are placed in nonaccrual status, charges ing operations with development grants, (u) purchase that had been accrued on development credits out- and cancellation of IDA credits by the World Bank standing to the member which remained unpaid are component of the HIPC Debt Initiative Trust Fund, deducted from the income from development credits of and (iii) the provision of debt service on selected IDA the current period Charges on nonaccruing develop- credits, in certain cases, by the HIPC Debt Initiative ment credits are included in income only to the extent Trust Fund that payments have actually been received by IDA. If collectibility risk is considered to be particularly high at Under the Enhanced Framework of the initiative, the time of arrears clearance, the member's credits may which was approved by IDA's Executive Directors on not automatically emerge from nonaccrual status, even January 27, 2000, implementation mechanisms also though the member's eligibility for new credits may include (i) partial forgiveness of IDA debt service as it have been restored A decision on the restoration of comes due, to be reimbursed to IDA by the World Bank accrual status is made on a case-by-case basis after a Group component of the HIPC Debt Initiative Trust suitable penod of payment performance has passed Fund; and (ii) in the case of countries with a substantial from the time of arrears clearance amount of outstanding IBRD debt, partial refinancing In fulfillng its mission, IDA makes concessional loans by IDA resources (excluding transfers from IBRD) of to the poorest countries, therefore there is significant outstanding IBRD debt credit risk in the portfolio of development credits Man- Commencing in the fourth quarter of fiscal year 2000, agement continually monitors this credit risk No provi- development grants and any impairments of IDA's out- sion for credit losses, other than allowances for the standing development credits in connection with the Heavily Indebted Poor Countries (HIPC) Debt Initia- HIPC Debt Initiative are recognized as charges to tive, has been established This is because it is not prac- mcome. This recognition occurs when IDA either ticable to determine a provision for credit losses in view approves development and/or debt service grants or of the nature and maturity structure of the credit port- determines that impairments to IDA's credits are prob- folio Should probable losses occur, they would be able and can be reasonably estimated Previously, devel- included in the Statement of Income. opment grants and such impairments were not charged to income Instead, they were directly reported in the The repayment obligations of IDA's development cred- Statement of Sources and Applications of Develop- its funded from resources through the Fifth Replenish- ment Resources, as a separate ine item titled Heavily ment are expressed in the development credit Indebted Poor Countries Debt Initiative agreements In terms of 1960 dollars In June 1987 the Executive Directors decided to value those develop- Investments ment credits at the rate of $1 20635 per 1960 dollar on a permanent basis Development credits funded from carriests investmet secue and relinan- resources provided under the Sixth Replenishment and 92 THE WORLD BANK ANNUAL REPORT 2001 unrealized gains and losses are included in Income from currency swaps for periods not exceeding one year, Investments including covered forwards Securities purchased under resale agreements and secu- Futures and Forwards: Futures and forward contracts rities sold under repurchase agreements are recorded at are contracts for delivery of securities or money market historical cost IDA receives securities purchased under instruments in which the seller agrees to make delivery resale agreements, monitors the fair value of the securi- at a specified future date of a specified instrument, at a ties and, if necessary, requires additional collateral specified price or yield. Futures contracts are traded on Accounting Changes regulated United States and international exchanges IDA generally closes out most open positions in futures Dunng fiscal year 2001, IDA adopted prospectively the contracts prior to maturity Therefore, cash receipts or Statement of Financial Accounting Standards (SFAS) payments are mostly limited to the change in market No 140, "Accounting for Transfers and Servicing of value of the futures contracts Futures contracts gener- Financial Assets and Extinguishments of Liabilities (a ally entail daily settlement of the net cash margin replacement of SFAS No. 125)." That statement revises Government and Agency Obligations: These obliga- the accounting standards for securitizations and other tions include marketable bonds, notes and other obliga- transfers of financial assets and collateral, and requires tions issued by governments Obligations issued or certain additional disclosures In the context of IDA, unconditionally guaranteed by governments of coun- that statement requires that securities transferred under tries require a minimum credit rating of AA if denomi- repurchase or secunty lending agreements be disclosed nated in a currency other than the home currency of separately from other trading investments At June 30, the issuer, otherwise no rating is required Obligations 2001, IDA's trading investments included $4,573 issued by an agency or instrumentality of a government million ($3,106 million-June 30, 2000) that had been of a country, a multilateral organization or any other transferred under repurchase or security lending official entity require a credit rating of AAA agreements Adoption of that standard did not have a Options: Options are contracts that allow the holder of material impact on IDA's financial statements the option the right, but not the obligation, to purchase In the fourth quarter of fiscal year 2000, IDA changed or sell a financial instrument at a specified price within its accounting policy related to the HIPC Debt Initia- a specified penod of time from or to the seller of the tive and restated its financial statements of prior years option The purchaser of an option pays a premium at a 1 1 r rrs rr r s ~~~~the outset to the seller of the option, who then bears to apply retroactively the new policy The effect of the the nsk o an selle of the o nwo e bears accounting change on income previously reported for the risk of an unfavorable change in the price of the fiscal year 1999 was a reduction of $154 million A financial instrument underlying the option IDA invests summary of the accounting policy and details of debt only in exchange-traded options The initial price of an relief provided under the HIPC Debt Initiatives are option contract is equal to the premium paid by the presented un Note I purchaser and is significantly less than the contract or notional amount IDA does not write uncovered option Beginning in fiscal year 2000, all investment securities contracts are included as an element of liquidity in the State- Repurchase and Resale Agreements and Securities ments of Cash Flows due to their nature, and IDA's pol- Loans: Repurchase agreements are contracts under icies governing the level and use of such investments a parchasecures and contacts agrer The Statements of Cash Flows for fiscal year 1999 have hich a party sells securities and simultaneously agrees beenresate to eflct hls hane fr whch her 15 to repurchase the same securities at a specified future been restated to reflect this change, for which there is date at a fixed price. The reverse of this transaction is no income effect. called a resale agreement A resale agreement involves NOTE B-INVESTMENTS the purchase of secunties with a simultaneous agree- As part of its portfolio management strategy, IDA ment to sell back the same securities at a stated price on invesparts in Ithe followg fancialgenstmentstrty I a stated date. Securities loans are contracts under which securities are lent for a specified period of time Asset-backed Securities: Asset-backed securities are at a fixed price instruments whose cash flow is based on the cash flows Short Sales: Short sales are sales of securities not held of a pool of underlying assets managed separately IDA the Sales port at the time of sale theld ma onl ines in ase-bce seuite wit am the seller's portfolio at the time of the sale The seller may only invest in asset-backed securities with a AAA must purchase the security at a later date and bears the credit rating. risk that the market value of the security will move Currency Swaps: Currency swaps are agreements adversely between the time of the sale and the time the between two parties to exchange cash flows denomi- security must be delivered nated in different currencies at one or more certain Time Deposits: Time deposits include certificates of times in the future The cash flows are based on a pre- de posit s' accepts and certificates deemie frmula relecigrtso itres an an posit, bankers' acceptances, and other obligations dteringed fofrmulareflectig rDates tof nteret anto an issued or unconditionally guaranteed by banks and exchange of principal IDA is authorized to enter into other financial institutions IDA SPECIAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 93 A summary of IDA's investments, by instrument, at June 30, 2001 and June 30, 2000 is as follows In milltons of US dollar equtvalent 2001 2000 a Average Net gains Average Net gains balance (losses) balance (losses) Carrying during the for the Carrying dunng the for the value fiscal year ftscal year value fiscal year fiscal year Government and agency obligations $ 8,604 $ 7,304 $ 9 $ 6,616 $ 7,288 $(172) Time deposits 6,573 7,659 - 7,348 7,838 Asset-backed securities 1,283 218 (3) - - - Currency swaps 10 (*) - 1 12 - Forwards, futures and options (*) 3 8 1 4 (1) Resale agreements 358 438 - 248 366 Repurchase agreements and securities loans (4,641) (3,323) - (3,108) (4,797) Total $12,187 $12,299 $14 $11,106 $10,711 $(173) Short sales b $ (9) $ (92) $- $ (226) $ (141) $ - a Restated to include Interim Trust Fund balances at June 30, 2000 b Included in Net (payable) receivable on investment secunties transactions in the Statement of Sources and Applications of Development Resources * Less than $0 5 million A summary of the currency composition of investments sents the maximum potential accounting loss due to at June 30, 2001 and June 30, 2000 is as follows. possible nonperformance by obligors and counterpar- ties under the terms of the contracts Additionally, the In millions of US dollars equivalent nature of the instruments involve contract value and notional principal amounts that are not reflected in the 2001 2000 a basic financial statements For both on- and off-balance sheet securities, IDA limits trading to a list of autho- Eurob $ 3,760 $ 2,664 nzed dealers and counterparties Credit limits have Japanese yen 783 1,724 been established for each counterparty by type of Pounds sterling 2,053 2,819 instrument and maturity category. US dollars 5,591 3,899 As of June 30, 2001, IDA received $356 million of Total $12,187 $11,106 secunties purchased under resale agreements. Of these instruments held by IDA, $42 million has been trans- ferred under repurchase or secunty lending agreements a Restated to nclude Inteim Trust Fund balances at None of these securities has been included in the assets June 30, 2000 of IDA b Effective January 1, 1999, the euro was introduced For reporting purposes, holdings in the twelve national The credit risk exposure and contract value, as applica- currencies that are considered national currency units ble, of these financial instruments at June 30, 2001 and of the euro have been aggregated with the euro and June 30, 2000 (prior to taking into account any master reported as euro, in both the current and prior year For the purpose of risk management, IDA is party to a variety of financial instruments, certain of which involve elements of credit risk in excess of the amount reflected in the Statement of Sources and Applications of Development Resources Credit risk exposure repre- 94 THE WORLD BANK ANNUAL REPORT 2001 derivatives agreements or collateral arrangements that SDR 15,343 million to fund concessional lending dur- have been made) are given below ing the period July 1, 1999 to June 30, 2002, became effective on March 23, 2000. Of this amount, new con- In millions of US dollars equivalent tributions from donor countries, including supplemen- 2001 2000 tary contributions provided by certain members and discounts on accelerated encashments, total SDR 8,640 Forwards, futures and options million Certain procurement restrictions apply to * Long position $105 $1,931 Twelfth Replenishment credits financed by donor * Short position - 1,165 funds * Credit exposure due to potential nonperformance Membership: In February 1993 the Socialist Federal by counterparties 7 Republic of Yugoslavia (SFRY) ceased to be a member Currency swaps of IDA due to the cessation of its membership in IBRD * Credit exposure due to potenitia exponperforman The Republic of Bosnia and Herzegovina (now called by counterpartles 10 9 Bosnia and Herzegovina), the Republic of Croatia, the former Yugoslav Republic of Macedonia, the Republic of Slovenia and the Federal Republic of Yugoslavia * Less than $0 5 million. (FRY) were authorized to succeed to the SFRY's mem- NOTE C-MEMBER SUBSCRIPTIONS ANDbership when certain requirements were met, including NOTE C-MEMBER SUBSCRIPTIONS AND entering into an agreement with IDA On June 5, 2001, the Executive Directors approved membership for the Subscriptions and Contributions Receivable: At June FRY in connection with its succession to membership 30, 2001 receivables from subscriptions and contrbu- of the former SFRY in IDA The paid-in portion of the 30, 2001' receivables fTom subscriptions and contriDu- SFRY's subscriptions and contributions allocated to the tions were $3,278 millon ($6,627 million-June 30, FRY, $7 million, which was included under Payments 2000) of which $80 million ($55 million-June 30, on $7 o n Membership inder 2000t 2000) was due and $3,198 million ($6,572 million- on Account of Pendig Membership i fiscal year 2000 June 30,2000)was not yet due. ' is now included under Subscriptions and Contributions June 30, 2000) was not yet due. Paid In. Subscnptions and contributions due at June 30, 2001 All five successor Republics-Bosnia and Herzegovina, were as follows. the Republic of Croatia, the Republic of Slovenia, the former Yugoslav Republic of Macedonia and FRY-are In millions of US. dollars equivalent now members of IDA Amounts intially due from NOTE D-TRANSFERS AND RECEIVABLES FROM IBRD July 1, 2000 through June 30, 2001 $79 June 30, 2000 and earlier I IBRD's Board of Governors has approved aggregate transfers to IDA totaling $6,755 million through June Total $80 30, 2001 ($6,435 million-June 30, 2000) The aggre- gate transfers reported in the Statement of Sources and Applications of Development Resources may differ from the amount of aggregate transfers approved due to Subscriptions and contributions not yet due at June 30, exchange rate movements 2001 will become due as follows Of the aggregate transfers, $320 million in SDRs valued In millions of US dollars equivalent at June 30, 2000 was approved by IBRD's Board of Governors on September 27, 2000 Of this amount, Penod $300 million will be drawn down in fiscal year 2005, at the end of the defined encashment schedule for donor July 1, 2001 through June 30, 2002 $3,160 contributions to IDA's Twelfth Replenishment The July 1, 2002 through June 30, 2003 21 remaining $20 million in SDRs, in reimbursement for Thereafter ' 7 IDA's share of the fiscal year 2000 cost of Thereafter 17 implementing IBRD's and IDA's Strategic Compact, was transferred on October 18, 2000. The transfer Total $3,198 reported in the Statement of Cash Flows is different due to exchange rate movements. Twelfth Replenishment: On April 8, 1999, the Board of At June 30, 2001, the unremitted balances of all the Governors of IDA adopted a resolution authorizing the approved aggregate transfers from IBRD have been Twelfth Replenishment of IDA's resources. The Twelfth included in Receivable from the International Bank for Replenishment, which provides IDA with resources of IDA SPECIAL PURPOSE FINANCIAL STATEMENTS. JUNE 30, 2001 95 Reconstruction and Development in the Statement of Framework is included under accumulated allowance Sources and Applications of Development Resources for HIPC Debt Initiative in the Statement of Sources and Application of Development Resources. This NOTE E-DEVELOPMENT CREDITS amount is net of any debt relief delivered to date. Accumulated Allowance for Heavily Indebted Poor Upon approval by the Executive Directors of IDA in Countries Debt Initiative connection with the sales of IDA credits to the HIPC Debt Initiative Trust Fund, the estimated write-down, Development credits outstanding are presented in the representing the difference between the carrying value Statement of Sources and Applications of Develop- and the net present value (see Note F) of the develop- ment Resources before any allowance in connection ment credits identified for sale, is recorded under accu- with either the Enhanced or Original HIPC Framework mulated allowance for HIPC Debt Initiative in the (see Note I) Statement of Sources and Application of Development The nominal value of the principal component of the Resources debt relief to be provided under the Enhanced HIPC Changes to the accumulated allowance for HIPC Debt Initiative for the fiscal years ended June 30, 2001 and June 30, 2000 are summarized below In mtllions of US dollars equivalent 2001 2000 a Balance, beginning of the fiscal year $8,071 $ - Enhanced HIPC Framework Allowance for principal component of debt relief 686 8,009 Principal component of debt relief delivered (105) (I l) 581 7,998 Original HIPC Framework Allowance for write-down on sale of development credits 24 455 Write-down on sale of development credits (97) (382) (73) 73 Balance, end of the fiscal year b $8,579 $8,071 a Restated to include Intenm Trust Fund activity for the fiscal year ended June 30, 2000 b This balance is the sum of the principal component of the actual amount of debt relief remaining to be provided to those countrnes that have reached their decision points, and in certain cases their completion points, and the pnncipal component of the best estimate available of the amount of debt relief that is expected to be provided to other eligible countries Overdue Amounts ($4,264 million-June 30, 2000), of which $340 mil- At June 30, 2001, principal of $2 million and charges of lion ($284 million-June 30, 2000) was overdue, were $1 million payable to IDA on development credits, in nonaccrual status At such date, overdue charges in other than those referred to in the following paragraph, respect of these development credits totaled $207 mil- were overdue by more than three months At June 30, lion ($185 million-June 30, 2000) If these develop- 2001, the aggregate principal amounts outstanding on ment credits had not been in nonaccrual status, income all development credits to any borrower, other than from development credits net of charges received from those referred to in the following paragraph, with any such members during the period, for the fiscal year development credits overdue by more than three ended June 30, 2001 would have been higher by $34 months was $1,049 million million ($29 million-June 30, 2000 and $35 million- June 30, 1999). At June 30, 2001, development credits made to or guaranteed by certain member countries with an aggre- gate prncipal balance outstanding of $5,887 million 96 THE WORLD BANK ANNUAL REPORT 2001 A summary of borrowers with development credits or guarantees in nonaccrual status follows In millions of US dollars equivalent June 30, 2001 Principal and Pnncipal Charges Nonaccrual Borrower Outstanding Overdue Since With overdues Afghanistan $ 75 $ 24 June 1992 Congo, Democratic Republic of 1,150 170 November 1993 Congo, Republic of 150 - November 1997 C6te d'lvoire 1,316 5 March 2001 Liberia 98 26 April 1988 Myanmar 694 62 September 1998 Somalia 386 76 July 1991 Sudan 1,136 179 January 1994 Zimbabwe 419 5 October 2000 Total 5,424 547 Without overdues Bosnia and Herzegovina 434 - September 1992 Syrian Arab Republic 29 - April 1988 Total $5,887 $547 During fiscal year 2001, all credits made to, or guaran- Fifth Dimension Program teed by Zimbabwe and C6te d'lvoire were placed in Under the Fifth Dimension program established in Sep- nonaccrual status. tember 1988, a portion of principal repayments to IDA is allocated on an annual basis to provide supplemen- During the fiscal year ended June 30, 2000, Comoros tary IDA development credits to IDA-eligible countries paid off all its arrears to IDA Its development credits that are no longer able to borrow on IBRD terms but came out of nonaccrual status on January 6, 2000 As a have outstanding IBRD loans approved prior to Sep- result, income from development credits for the year tember 1988 and have in place an IDA-supported ended June 30, 2000 increased by $1 million, corre- structural adjustment program Such supplementary sponding to income that would have been accrued in IDA credits are allocated to countries that meet speci- the previous fiscal year had these development credits fied conditions, in proportion to each country's interest not been in nonaccrual status payments due that year on its pre-September 1988 IBRD loans To be eligible for such IDA supplemental During fiscal year 1999, Sudan reached an credits, a member country must meet IDA's eligibility understanding with IBRD and IDA under which Sudan criteria for lending, must be ineligible for IBRD lending agreed to make regular monthly payments of $1 million and must not have had an IBRD loan approved within to clear its arrears beginning in July 1999 These the last twelve months To receive a supplemental payments were to be applied first to IBRD arrears and credit from the program, a member country cannot be then to arrears with IDA As of June 30, 2000, Sudan more than 60 days overdue on its debt-service pay- had paid off all of its arrears to IBRD, and consequently, ments to IBRD or IDA the entire monthly payment is being applied to IDA arrears IDA SPECIAL PURPOSE FINANCIAL STA'I'EMENTS JUNE 30, 2001 97 A summary of cumulative IDA credits committed and Development Credits: IDA's development credits have disbursed under this program from inception, at June a significant grant element because of the concessional 30, 2001 and June 30, 2000 is given below. nature of IDA's terms Discounting the future cash flows from IDA's development credits using govern- In mtlltons of US dollars equivalent ment reference rates represented by interest rates of government secunties having similar maturity to the 2001 2000 portfolio of development credits, provides an estimate for the grant element Under the Original HIPC Debt Commitments $1,679 $1,659 Initiative, development credits identified for sale to the Less undisbursed 28 29 HIPC Debt Initiative Trust Fund are written down to their estimated net present value using currency spe- Disbursed and cific Commercial Interest Reference Rates (CIRRs) Outstanding $1,651 $1,630 published monthly by the Organization for Economic Cooperation and Development (OECD) Using the six months average CIRR as a discount rate provides an Guarantees alternative estimate for the grant element The guarantee of a development credit of $28 million Since IDA's development credits are denommnated at June 30, 2001 ($30 million-June 30, 2000) was not either in U S dollars or SDRs, currency specific rates included in the Total Resources Used for Development have been used to discount the corresponding future Credits. At June 30, 2001 and June 30, 2000, no cash flows for each currency component of the devel- amounts were subject to call opment credits, before being aggregated to provide the Segment Reporting composite results. For fiscal year 2001, development credits to two coun- The grant element calculations consider interest rates, tries individually generated m excess of ten percent of maturity structures and grace periods for the credits. total income from these credits, amounting to $141 They do not consider credit risk, portfolio seasoning, million and $65 million multilateral and sovereign credit preferences and other risks or indicators that would be relevant in calculating NOTE F-FAIR VALUE OF FINANCIAL fair value. Estimating the impact of these factors is not INSTRUMENTS practicable However, under either altemative, the estimated fair Investments: Since IDA carries Its investments at mar- vaue ofdvlpetceisottnigaesbtn ket value, the carrying amount represents the fair value values of development credits outstandmg are substan- of the portfolio These fair values are based on quoted tially lower than the $86,572 million reflected on the market prices, where available If quoted market prices Statement of Sources and Applications of Develop- 1 1'l r . . . . 1 . ment Resources at June 30, 2001 ($86,643 million- are not available, fair values are based on quoted market June 3 2 prices of comparable instruments The fair value of June 30, 2000), as shown in the following table. short-term financial instruments approximates their carrying value In millions of US dollars equivalent June 30, 2001 June 30, 2000 a Government Government reference rate- reference rate- based CIRR-based based CIRR-based fair value fair value fair value fair value Development credits outstanding $86,572 $86,572 $86,643 $86,643 Less grant equivalent 37,840 40,602 38,859 45,039 Estimated value of development credits outstanding $48,732 $45,970 $47,784 $41,604 Estimated grant element 44% 47% 45% 52% Discount Rates Used Discount Rates Used Government reference rates - US dollar 5 45% 6 01% - SDRb 4 93% 4.90% CIRRs Average of six months to June - US dollar 6 11% 7 46% - SDR 5 40% 6 02% a. Restated to include Interim Trust Fund balances at June 30, 2000. b. Implies weighted average government reference rates of the component currencies contained in the SDR 98 THE WORLD BANK ANNUAL REPORT 2001 Discounting the future cash flows from IDA's develop- element The estimated grant element based on this ment credits using the standard 10 percent discount standard DAC rate for IDA's development credits is 67 rate of the Development Assistance Committee (DAC) percent as of June 30, 2001 (68 percent-June 30, of the OECD, provides another alternative for the grant 2000) NOTE G-ADMINISTRATIVE EXPENSES IDA's share of the administrative expenses incurred The following table shows the administrative expenses, jointly by IBRD and IDA is set out below net of IDA's share of income from pension plan and other postretirement benefits plans In millions of US dollars 2001 2000 1999 IDA's allocated share of administrative expenses incurred jointly by IBRD and IDA $551 $549 $518 Less IDA's share of income from pension plan and other postretirement benefits plans 124 111 150 Total $427 $438 $368 NOTE H-IRUST FUNDS ADMINISTRATION IDA, alone or jointly with IBRD, administers on behalf borrowers including feasibility studies and project prep- of donors, including members, their agencies and other aration, global and regional programs and research and entities, funds restricted for specific uses which include training programs. These funds are placed in trust and the cofinancing of IDA lending projects, debt reduction are not included in the development resources of IDA operations for IDA members, technical assistance for At June 30, 2001 and June 30, 2000, the allocation of trust fund assets by executing agent were as follows 2001 2000 Tfotalfiduciary Number of Total fiduciary Number of assets trust fund assets trust fund (In millions) accounts (In millonsj accounts IDA executed $ 623 1,037 $ 347 572 Recipient executed 2,067 987 1,831 1,426 Total $2,690 2,024 $2,178 1,998 The responsibilities of IDA under these arrangements tion of the admilnstrative expenses charged by IBRD vary and range from services normally provided under During the fiscal year ended June 30, 2001, IDA its own lending projects to full project implementation received $11 million ($7 million-June 30, 2000, $6 including procurement of goods and services IDA million-June 30, 1999) as fees for administering trust receives fees for administering trust funds as a reduc- funds IDA SPECIAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 99 NOTE I-IMPACT FROM HEAVILY INDEBTED Debt Service Grants POOR COUNTRIES DEBT INITIATIVE During the year ended June 30, 2001, the Executive Enhanced HIPC Framework Directors of IDA had approved debt service grants totaling $101 million, made up of $37 million for Hon- Assistance under the Enhanced HIPC Framework is duras and $64 million for Cameroon. Of the $101 mil- provided by IDA, by debt service relief (forgiving a por- hon approved, $31 million has been provided to date tion of an eligible country's IDA debt service obliga- by IDA and $70 million is yet to by provided Of the tions as they become due), and by means of debt $31 million provided, $15 million has been reimbursed service grants as partial refinancing by IDA resources by the HIPC Debt Initiative Trust Fund (excluding transfers from IBRD) of outstanding IBRD Receivable from tie HIPC Debt Initiative Trust Fund debt Debt Service Relief A summary of changes to the receivable from the HIPC Debt Initiative Trust Fund is presented below On January 27, 2000, the Executive Directors of IDA gave approval for IDA to provide debt relief under the In millions of US dollars enhanced HIPC framework by forgiving a portion of an 2001 2000 eligible country's IDA debt service obligations as they _ become due. Amounts of IDA debt service forgiven are Balance, beginning of the fiscal year $ 590 $ - expected to be reimbursed by the World Bank compo- Contribution from the HIPC Debt nent of the HIPC Debt Initiative Trust Fund on a pay- Initiative Trust Fund 177 601 as-you-go basis Reimbursement received for principal repayments forgiven (105) (I11) Upon approval of the Enhanced HIPC Framework by Reimbursement received for debt the Executive Directors of IDA, the nominal value of service grants disbursed (15) - the principal component of the estimated debt relief costs is recorded as a reduction of the disbursed and Balance, end of the fiscal year $ 647 $590 outstanding development credits under accumulated allowance for HIPC Debt Initiative, and as a charge to income This estimate is subject to periodic revision Original HIPC Framework Upon signature by IDA of the country specific legal Assistance under the Original HIPC Framework has notification, immediately following the decision by the been provided by IDA by means of development grant Executive Directors of IDA to provide debt relief to the funding in lieu of credit funding and sales of develop- country (the decision point), a receivable from the ment credits to the HIPC Debt Initiative Trust Fund HIPC Debt Initiative Trust Fund is created (to the Development Grants extent that funds are available) and income is recog- nized This receivable is limited to the nominal value At June 30, 2001, development grants provided by equivalent of one-third of the net present value of the country and source of funding since inception of the principal component of the total debt relief committed Original HIPC Framework are as follows to the specific country, and is the maximum debt relief that can be provided before the country reaches its In millions of US dollars equivalent completion point A completion point is reached when Source of Funds the conditions specified in the legal notification are met, and the country's other creditors have confirmed Transfers Eleventh their full participation in the debt relief initiative from IBRD eplenishment Total Donor Funds A receivable from the HIPC Debt Initiative Trust Fund Development is created and income is recognized when the country grants reaches its completion point This receivable represents provided. the remaining principal component of the total debt Uganda $75 $ - $ 75 relief committed that was not recognized at the deci- Mozambique - 154 154 sion point Total $75 $ 154 $229 The accumulated allowance for HIPC Debt Initiative is reduced when debt relief is provided by IDA A sum- mary of changes to the accumulated allowance for Sales of IDA Development Credits HIPC Debt Initiative is presented under Note E Sells ofeIDADevelopment redits IDA sells specific development credits to the HIPC Debt service relief composed of $117 million in pnnci- Debt Initiative Trust Fund for cash at a price equivalent pal repayments and $36 million in charges has been to the net present value (see Note F) of the develop- provided to date by IDA, all of which was reimbursed ment credits, as calculated using the methodology by the HIPC Debt Initiative Trust Fund agreed under the Original HIPC Framework. Upon approval by the Executive Directors of IDA, the esti- 100 THE WORLD BANK ANNUAL REPORT 2001 mated write-down, representing the difference mated write-down is adjusted to reflect the actual between the carrying value and the net present value of difference between the cash received and the carrying the development credits identified for sale, is recorded value of the development credit sold The HIPC Debt under accumulated allowance for HIPC Debt Initiative Initiative Trust Fund subsequently cancels these devel- in the Statement of Sources and Application of Devel- opment credits opment Resources On the settlement date, the esti- At June 30, 2001, the cumulative position of the sales of IDA development credits under the Onginal HIPC Frame- work is as follows In millions of US dollars equivalent Fiscal Year in Carrying Charge Against Which Sold Value Net Present Value Income Development Credits Sold Uganda 1999 $ 177 $ 84 $ 93 Guyana 2000 52 27 25 Mozambique 2000 684 327 357 Burkina Faso 2001a 159 91 68 Mali 2001 71 42 29 Total development credits sold $1,143 $571 $572 a Upon Board approval, a wnte-down for the sale of the Burkina Faso development credits was recorded in fiscal year 2000. The sale was executed in fiscal year 2001 Debt Service on Development Credits The HIPC Debt Initiative Trust Fund also services had been approved for this purpose These amounts are selected IDA development credits as they come due not recorded in the Statement of Sources and Applica- over a period of years From inception through June 30, tions of Development Resources of IDA, as the HIPC 2001, $52 million for Uganda and $54 million for Debt Initiative Trust Fund is a legally separate entity Bolivia, as well as the associated investment income, administered by IDA NOTE J-COMPREHENSIVE INCOME Comprehensive income consists of net income and after HIPC Debt Initiative These items are presented other gains and losses affecting sources of development in the Statement of Comprehensive Income The fol- resources that, under generally accepted accounting lowing table presents the changes in Accumulated principles, are excluded from net income. For IDA, Other Comprehensive Income balances for the years comprehensive income comprises currency translation ended June 30, 2001, 2000 and 1999: adjustments on development credits and income or loss In millions of US dollars equivalent Accumulated Other Comprehensive Income a 2001 2000 b 1999 b Balance, beginning of the fiscal year $ (738) $(206) $(401) Changes from period activity (4,230) (532) 195 Balance, end of the fiscal year ___$(4,968) $(738) $(206) a The total accumulated other comprehensive income represents the cumulative translation adjustment on development credits b Restated to include Intenm Trust Fund actzvity for the fiscal years ended June 30, 2000 and June 30, 1999, see Note A IDA SPECIAL PURPOSE FINANCIAL STATEMENTS JUNE 30, 2001 101 SUPPLEMENTARY INFORMATION ON THE HEAVILY INDEBTED POOR COUNTRIES DEBT INITIATIVE Summary of HIPC Debt Initiative The summary table below shows debt relief for countries that have reached their decision or completion points as of June 30, 2001, and estimated amounts to be provided to other eligible countnes (with the exception of those countries for which cost estimates are not currently available), under both the Enhanced and Original Heavily Indebted Poor Countries (HIPC) Debt Initiative In addition to the total debt relief of $10,967 million, IDA is expected to extend new credits estimated at $232 million to certain IDA-eligible countries no longer able to borrow on IBRD terms, but with outstanding IBRD debt These credits will be funded by IDA resources other than transfers from IBRD In millions of US dollars equivalent HIPC IDA a Trust Fund b Total Countries that have reached their decision or completion pointsc Provided to date Enhanced HIPC Principal $ 117 $ - $ 117 Service charges 36 5 41 Debt service grants 31 - 31 184 5 189 Original HIPC Sale of development credits 572 571 1,143 Development grants 229 - 229 Debt service - 81 81 801 652 1,453 Total debt relief provtded to date 985 657 1,642 Remainder to be provided Enhanced HIPC Principal 6,130 - 6,130 Service charges 276 2 278 Debt service grants 70 - 70 6,476 2 6,478 Original HIPC Debt service - 38 38 Total debt relief to be provided 6,476 40 6,516 Other eligible countries that have not reached their decision or completion points Estimated amount to be provided Enhanced HIPC Principal 2,448 - 2,448 Service charges 361 - 361 Total estimated debt relief to other eligible countrnes 2,809 - 2,809 Total Debt Relief $10,270 $697 $10,967 Composed of: Enhanced HIPC $ 9,469 $ 7 $ 9,476 Onginal HIPC 801 690 1,491 $10,270 $697 $10,967 a Restated to include Intenm Trust Fund activity and balances at June 30, 2000, see Note A b The debt relhef shown relates only to the World Bank component of this trustfund, and includes amounts approved up to June 30, 2001 by the Executzve Directors of IDA c As of June 30, 2001, the 23 countnes that have reached their decision points are Benin, Bolivia, Burkina Faso, Cameroon, Chad, The Gambia, Guinea, Guinea-Bissau, Guyana, Honduras, Madagascar, Malawi, Mali, Maurntania, Mozambique, Nicaragua, Niger, Rwanda, Sao Tome and Pnncipe, Senegal, Tanzania, Uganda, and Zambia 102 THE WORLD BANK ANNUAL REPORT 2001 REPORT OF INDEPENDENT ACCOUNTANTS ON SPECIAL PURPOSE FINANCIAL STATEMENTS Deloite Touche Tohmatsu (international Firm) Suite 500 555 12th Street,N.W Washington, DC 20004-1207 Tel: (202) 897 5600 Fax: (202) 879 5309 www us deloitte.com Deloitte Touche Tohmatsu (International Firm) President and Board of Governors International Development Association We have audited the accompanying special purpose statements of sources and applications of development resources of the International Development Associaton as of June 30, 2001 and 2000, including the sunmiary statement of developmnent credits and statement of votng power, and subscriptions and contrbutons as of June 30, 2001, and the related special purpose statements of income, comprehensive mcome, changes m retained eanings, and cash flows for each of the tbree fiscal years m the period ended June 30, 2001. These special purpose financial statements are the responsibility of the International Developmcnt Association's management. Our responsibihty is to express an opinion on these special purpose financlal statements based on our audits. We conducted our audits m accordance with auditing standards generally accepted m the United States of America and International Standards on Auditing. Those standards require that we plan and perform the audit to obtamn reasonable assurance about whether the financial statements are free of materal misstatement. An audit includes examimng, on a test basis, evidence supportmg the amounts and disclosures in the financial statements. An audit also includes assessmg the accountng principles used and significant estimates made by management, as wel as evaluating the overal financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The accompanying special purpose financial statements were prepared to reflect the sources and applications of development resources, operations, and cash flows of the International Development Association to comply with Article VI, Section II(a) of the Articles of Agreement of the International Development Association, as discussed in Note A to the special purpose financial statements, and are not intended to be a presentation in conformity with accounting prmciples generally accepted m the United States of America or International Accounting Standards. In our opinion, such special purpose financial statements referred to above present fairly, in all matenal respects, the sources and apphcations of development resources of the International Development Association as of June 30, 2001 and 2000, and the results of its operations and its cash flows for each of the three fiscal years in the period ended June 30, 2001 m conformity with the accounting principles descnbed in Note A to the special purpose financial statements. As discussed in Note A to the special purpose financial statements, on May 25, 2001, the Interim Trust Fund was terminated and aU of its assets and habilities were transferred to the International Development Association. Accordingly, the information in the special purpose financial statements and related notes reflect the combined results of the International Development Association and the Interim Trust Fund as if the transfer had been in effect for aU periods presented. This report is intended solely for the information and use of the Board of Govemors, management, and members of the International Development Association. However, under the International Development AssociatLon's Articles of Agreement, this report is a matter of public record and its distnbution is not limited. -QaWe-rav,A ( ((44 44;a July 30, 2001 IDA SPECIAI PURPOSE FINANCIAI STATEMENTS JUNE 30, 2001 103 IBRD/IDA Appendixes Appendix 1 World Bank Expenditures, by Program, Fiscal 1997-2001 107 Appendix 2 Country Eligibility for Borrowing from the World Bank 108 Note to Appendixes 3-7 110 Appendix 3A IBRD and IDA Disbursements for Foreign and Local Expenditures 111 Appendix 3B. IBRD and IDA Disbursements for Foreign Expenditures, by Source of Supply 112 Appendix 3C IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local and Foreign Procurement in Fiscal 2001 113 Appendix 4 IBRD and IDA Payments to Supplying Countries for Foreign Procurement 116 Appendix 5 IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal 2001 119 Appendix 6 IBRD and IDA Disbursements for Foreign Expenditures, by Description of Goods (for Investment Lending), Fiscal 1999-2001 122 Appendix 7 Estimates of IBRD and IDA Payments to Supplying Countries for Foreign Procurement under Adjustment Lending, Fiscal 2001 123 Appendix 8 IBRD and IDA Cumulative Lending Since Fiscal 1990 by Major Purpose and Region, June 30, 2001 125 Appendix 9 IBRD and IDA Cumulative Lending by Country, June 30, 2001 127 Appendix 10 Projects Approved for IBRD and IDA Assistance in Fiscal 2001, by Region, July 1, 2000-June 30, 2001 131 Appendix 1 I Projects Approved for IBRD and IDA Assistance in Fiscal 2001, by Purpose, July 1, 2000-June 30, 2001 133 Appendix 12 Development Committee Communiques, Fiscal 2001 138 Note Information formerly presented in IBRD/IDA appendixes covering Governors and Altcrnates of the World Bank, Executive Directors and Alternates of the World Bank anld their Voting Power, Officers of the World Bank, Offices of the World Bank, and Country Ehgibility for Borrowing from the World Bank (also included above) is now included in The Witorld Bank Annual Report Volume 1, Year in Review, chapter 8, page 127 105 Appendix 1: World Bank Expenditures, by Program, Fiscal 1997-2001 (amounts in millions of U.S. dollars) Actual FY97 FY98 FY99 FY00 FY01 Program Regional 649 7 709 0 739 5 778 7 707 8 Networks 56 2 84 0 107 3 122 6 117 9 Other operational programs 84 105 12 7 185 23 3 Development Economics and World Bank Institute 87.8 95 3 101 8 92 4 98 3 Financial 74 4 74 9 83 3 85 7 94 2 Administrative 136 6 153 8 155.0 164 1 159 9 Corporate management and services 85 5 87 9 93 8 92 0 100 2 Overheads, benefits, and contingencies 56 8 46 0 34 7 24 8 38.3 Administrative budget 1,155 3 1,261 3 1,328 2 1,378.7 1,339 9 Less Reimbursements and fee income (107 6) (102 9) (115 1) (117 8) (144 7) Net administrative budget 1,047 8 1,158.4 1,213 1 1,260 9 1,195 1 Plus Staff retirement plan (SRP), retired staff benefit plan (RSBP), and related management fees 126 5 12 4 - 2 0 4 2 Net administrative budget plus SRP/RSBP contributions 1,174 3 1,170 8 1,213 1 1,262.9 1,199 3 Development Grant Facility 120 0 110 3 129 4 126 1 147 4 Corporate Secretariat 53 0 57 1 58 1 618 64 9 Operations evaluation 152 16.0 16 8 185 192 Less Reimbursements and fee income (0 5) (I 0) (I 3) (I 5) (I 2) Total administrative budget 1,362 0 1,353 3 1,416 2 1,467 9 1,429.6 Note Amounts may not add to totals because of rounding World Bank Expenditures, by Program, Fiscal 1997-2001 107 Appendix 2: Country Eligibility for Borrowing from the World Bank (as of July 1, 2001) Income group 2000 GNI Income group 2000 GNI and country per capitaa and country per capita Countries eligible for IBRD funds only Per capita income over $5,225 Micronesia, Federated States of 2,110 Slovenia 10,070 Dominican Republic 2,100 Antigua and Barbuda 9,190 Peru 2,100 Korea, Republic of 8,910 Tunisia 2,090 Argentina 7,440 Colombia 2,080 Seychelles 7,310 Namibia 2,050 St Kitts and Nevis 6,660 Thailand 2,010 Uruguay 6,090 El Salvador 1,990 Marshall Islands 1,970 Per capita income $2,996-$5,225 Fiji 1,830 Mexico 5,080 Macedonia, former Trinidad and Tobago 4,980 Yugoslav Republic of 1,710 Czech Republic 4,920 Guatemala 1,690 Hungary 4,740 Jordan 1,680 Chile 4,600 Romania 1,670 Croatia 4,510 Russian Federation 1,660 Venezuela, Republica Bolivariana de 4,310 Iran, Islamic Republic of 1,630 Poland 4,200 Algeria 1,590 Costa Rica 3,960 Bulgana 1,510 Mauritius 3,800 Egypt, Arab Republic of 1,490 Lebanon 3,750 Paraguay 1,450 Slovak Repubbc 3,700 Suriname n a. Brazil 3,570 Estonia 3,410 Per capita income $755-$1,445 Malaysia 3,380 Swaziland 1,290 Botswana 3,300 Ecuador 1,210 Panama 3,260 Kazakhstan 1,190 Gabon 3,180 Morocco 1,180 Turkey 3,090 Philippines 1,040 South Africa 3,020 Syrian Arab Repubilcd 990 Palau n.a China 840 Turkmenistan 840 Per capita income $1,446-$2,995 Papua New Guinea 760 Belarus 2,990 Equatorial Gutnea n.a Belize 2,940 Iraqd n a. Latvia 2,860 Lithuania 2,900 Per capita income less than $755 Jamaica 2,440 Ukraine 700 Countries eligible for a blend of IBRD and IDA fundsb Per capita income $2,996-$5,225 Per capita income less than $755 St Luclac 4,070 Uzbekistan 630 Grenadac 3,520 Azerbaijan 610 Dominicac 3,260 Indonesia 570 Zimbabwed 480 Per capita income $1,446-$2,995 Pakistan 470 St. Vincent and the Grenadinesc 2,690 India 460 Nigeria 260 Per capita income $755-$1,445 Bolivia 1,000 Bosnia and Herzegovina n a. Yugoslavia, Federal Republic ofd n.a 108 The World Bank Annual Report 2001 Income group 2000 GNI Income group 2000 GNI and country per capita' and country per capita" Countries eligible for IDA funds onlyb Per capita income $1,446-$2,995 Kenya 360 Tongac 1,660 Ghana 350 Maldivesc 1,460 Gambia, The 330 Samoac 1,460 Sudand 320 Uganda 310 Per capita income $755-$1,445 Togo 300 Cape Verde, 1,330 Zambia 300 Vanuatuc 1,140 Central African Republic 290 Kiribatic 950 Lao People's Democratic Republic 290 Sri Lanka 860 Sao Tome and Principe 290 Honduras 850 Tanzania 280 Djibouti 840 Kyrgyz Republic 270 Guyana 770 Cambodia 260 Albania n a Madagascar 260 Angola 240 Per capita income less than $755 Mali 240 C6te d'lvoired 660 Burkina Faso 230 Congo, Republic Ofd 630 Rwanda 230 Solomon Islands 630 Nepal 220 Georgia 590 Mozambique 210 Cameroon 570 Chad 200 Bbutan 550 Gumea-Bissau 180 Lesotho 540 Niger 180 Armenia 520 Eritrea 170 Haiti 510 Malawi 170 Senegal 500 Tajikistan 170 Guinea 450 Sierra Leone 130 Moldova 400 Burundi 110 Mongolia 390 Ethiopia 100 Vietnam 390 Afghanistand n a Bangladesh 380 Congo, Democratic Republic ofd n a Benin 380 Liberiad n a Comoros 380 Myanmard n a Yemen, Republic of 380 Nicaragua n a Mauritania 370 Somallad n a n a Precise figures not available a World Bank Atlas methodology, per capita GNI (gross national income, formerly GNP) figures are in 2000 U S dollars b Countries are eligible for IDA on the basis of (a) relative poverty and (b) lack of creditworthiness The operational cutoff for IDA eligibility for fiscal 2002 is a 2000 GNI per capita of $885, using Atlas methodology To receive IDA resources, countries also meet tests of performance In exceptional circumstances, IDA extends eligibility temporarily to countries that are above the operational cutoff and are undertaking major adjust- ment efforts but are not creditworthy for IBRD lending An exception has been made for small island economies (see footnote c) c During the IDA-12 period (fiscal 2000-02), an exception to the GNI per capita operational cutoff for IDA eligibility ($885 for fiscal 2002) has been made for some small island economies, which otherwise would have little or no access to Bank Group assistance because they lack credit- worthiness For such countries, IDA funding is considered case by case for the financing of projects and adjulstment programs designed to strenigth- en creditworthiness d Loans and credits in nonaccrual status as of July 1, 2001 Country Eligibility for Borrowing from the World Bank 109 Note to Appendixes 3-7 Disbursements and Procurement The procurement rules and procedures to be fol- Appendix 5 shows the proportion of foreign dis- lowed in the execution of each project depend on bursements from the IBRD and IDA for specific individual circumstances Four considerations gener- categories of goods and services provided by select- ally guide the Bank's requirements: ed member countries in fiscal 2001. * Economy and efficiency in the execution Appendix 6 provides a summary listing of the of a project,amutpadtelgbeWrdBnboowg * Opportunity for all eligible bidders from amounts paid to eligible World Bank borrowing borrowing and nonborrowing member country suppliers and nonborrowing country suppli- countres to compete In providing goods ers in each fiscal year from 1999 to 2001 under works, and services financed by the Bank investment projects Amounts disbursed are com- * Development of local contractors, manufac- pared with respect to significant categories of goods turers,and consultig services in borrowing procured from foreign suppliers The extent to turers, and which eligible borrowing countries and nonborrow- * Transparency in the procurement process. ing countries participated in supplying these major categories of goods in each of the past three fiscal Appendix 3A shows consolidated foreign and local years is also compared disbursements for the IBRD and IDA through the end of fiscal 1996 and for the period fiscal 1997 Under simplified procedures for structural and sec- through fiscal 2001 Advance disbursements consist toral adjustment loans approved by the executlve of payments made into special accounts of borrow- directors In fiscal 1996, disbursements are no longer ers, from which funds are paid to specific suppliers dlrectly linked to procurement under adjustment as expenditures are incurred. Because balances in loans disbursed using simplified procedures Thus, these accounts cannot be attributed to any specific while appendixes 3B to 6 report on disbursements supplying country until expenditures have been from the IBRD and IDA, they do not include dis- reported to the Bank, these are shown as a separate bursements under adjustment loans disbursed using category. simplified procedures The information in appendix 7 reflects simplified adjustment loan disbursements Appendix 3B provides details on foreign disburse- to each borrower as pro-rata shares of that bor- ments by countries eligible to borrow from the rower's eligible imports from supplying countries World Bank and nonborrowing countriese for the using import data drawn from United Nations IBRD and IDA separately. trade statistics Appendix 3C shows disbursements made in fiscal In all these tables and appendixes, IBRD figures 2001 by the IBRD and IDA for local procurement exclude disbursements for loans to the IFC and "B" by current borrowing countries and disbursements loans IDA figures include Special Facdity for Sub- made for goods, works, and services procured from Saharan Africa and Interim Trust Fund credits them by other Bank borrowers (foreign procure- Disbursements for Project Preparation Facility ment) for projects funded by the Bank. advances are excluded for both the IBRD and IDA. Appendix 4 shows the amounts disbursed from the IBRD and IDA separately for foreign procurement of goods, works, and services from selected member countries in fiscal 2001 and cumulatively through fiscal 2001 1 Appendix 2 lists countries eligible for borrowing from the World Bank 110 The World Bank Annual Report 2001 Appendix 3A: IBRD and IDA Disbursements for Foreign and Local Expenditures (amounts in millions of U.S. dollars) IBRD and IDA Net advance Foreigna Local disbursementsb Total Amount % Amount % Amount % Amount Cumulative to June 30,1996 150,401 57 110,570 42 4,690 2 265,661 1997 8,733 44 10,543 53 487 2 19,763 1998 14,292 57 10,112 41 449 2 24,853 1999 14,781 61 8,859 36 736 3 24,376 2000 8,742 47 9,013 49 753 4 18,508 2001 8,104 47 8,504 49 698 4 17,307 Cumulative to June 30,2001 205,053 55 157,601 43 7,813 2 370,468 Note Foreign expenditures are expenditures in the currency of any couintry other than that of the borrower or guarantor, for goods or services supplied from the territory of any country other than the territory of the borrower or guarantor Local expenidituires are expenditures in the currency of the borrower or guarantor or for goods or services supplied from the territory of the borrower or the guarantor a Amounts exclude debt-reduction disbursements of $3,693 million through fiscal 1996, $213 million in fiscal 1997, and $82 million in fiscal 1998 Amounits include disbursements under simplified procedures for structuiral and sectoral adjustment loans of $556 million through fiscal 1996, $3,333 million in fiscal 1997, $9,540 million in fiscal 1998, $10,423 million in fiscal 1999, $5,329 iiillion in fiscal 2000, and $5,366 mil- lion in fiscal 2001 Amounts include HIPC initiative grant disbursements of $74 million in fiscal 1998, $149 million in fiscal 1999, and $31 mil- lion in fiscal 2001 b Net advance disbursements are advances made to special accounts net of amounts recovered (amounts for which the Bank has applied evidence of expenditures to recovery of the outstanding advance) Amouists may not add to totals because of rounding IBRD and IDA Disbursements for Foreign and Local Expenditures Appendix 3B: IBRD and IDA Disbursements for Foreign Expenditures, by Source of Supply (amounts in millions of U.S. dollars) IBRD IDA Countries not Countries Countries not Countries eligible to eligible to eligible to eligible to borrow borrow borrow borrow Total Total Period Amount % Amount % Amount Amount % Amount % Amount Cumulative to June 30,1996 93,426 86 15,584 14 109,010 31,907 78 8,928 22 40,835 1997 3,081 86 522 14 3,603 1,372 76 428 24 1,800 1998 2,733 85 469 15 3,202 1,103 75 374 25 1,477 1999 2,228 89 275 11 2,503 1,164 68 542 32 1,706 2000 1,842 84 343 16 2,186 851 69 376 31 1,228 2001 1,434 87 213 13 1,647 694 66 364 34 1,058 Cumulative to June 30,2001 104,744 86 17,406 14 122,151 37,091 77 11,012 23 48,104 Note Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simphfied procedures for structur- al and sectoral adjustment loans and disbursements under HIPC Initiative grants Countries eligible to borrow from IBRD and IDA are listed m appendix 2 For consistency of comparison, the Republic of Korea and the Federal Republic of Yugoslavia are included as countries eligible to bor- row for all periods covered by thus table Korea (a former graduate) again became eligible to borrow in December 1997 The Federal Republic of Yugoslavia's eligibility was re-established in May 2001 Amounts may not add to totals because of rounding 112 The World Bank Annual Report 2001 Appendix 3C: IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local and Foreign Procurement in Fiscal 2001a (amounts in millions of U S. dollars) Percentage Borrowing Local Foreign Total of total countries procurement procurement amount disbursementsh Afghanistan - -- Albania 20 - 20 0 12 Algeria 33 + 34 0.19 Angola 5 + 5 Argentina 480 31 511 2.96 Armenia 28 + 28 0 16 Azerbaijan 10 + 10 0 06 Bangladesh 218 1 219 1 27 Barbados + + + Belarus I + I * Belize 5 - 5 * Benin 28 6 34 0 19 Bhutan 3 - 3 * Bolivia 45 2 48 0 28 Bosnia and Herzegovina 15 1 16 0 09 Botswana - + + * Brazil 472 9 481 2.79 Bulgaria 13 6 19 0.11 Burkina Faso 19 + 20 0 11 Burundi 4 - 4 * Cambodia 20 - 20 0 12 Cameroon 13 + 13 0 08 Cape Verde 5 - 5 * Central African Republic + + + * Chad 17 - 17 0 10 Chile 39 1 41 0 24 China 1,395 152c 1,547 8 96 Colombia 217 3 220 1 27 Comoros 2 - 2 * Congo, Democratic Republic of - -- Congo, Republic of - - - Costa Rica 4 2 6 * C6te d'lvoire 9 1 10 0.06 Croatia 18 6 23 0 14 Cyprus - 3 3 * Czech Republic - 10 10 0 06 Djibouti 3 2 5 * Dominica + + + Dominican Republic 35 2 37 0 22 Ecuador 61 1 62 0.36 Egypt, Arab Republic of 42 11 54 0 31 El Salvador 19 2 20 0 12 Equatorial Guinea - - - Eritrea 50 - 50 0.29 Estonia 2 2 4 * Ethiopia 44 + 45 0.26 Fiji - - Gabon 4 - 4 * Gambia, The 6 + 6 Georgia 16 1 17 0 10 Ghana 53 2 56 0 32 Grenada + - + * Guatemala 45 1 46 0 27 Guinea 18 1 19 0 11 Guinea-Bissau 2 - 2 * (continued next page) IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local and Foreign Procurement in Fiscal 2001 113 Appendix 3C (continued) Percentage Borrowing Local Foreign Total of total countries procurement procurement amount disbursements' Guyana 5 + 5 * Haiti 2 - 2 * Honduras 20 - 20 0 11 Hungary 11 2 13 0 08 India 1,274 33 1,306 7 56 Indonesia 561 2 563 3.26 Iran, Islamic Republc of 81 5 86 0 50 Iraq * Jamaica 21 + 21 0.12 Jordan 29 + 29 0 17 Kazakhstan 10 4 15 0 08 Kenya 59 10 69 0 40 Korea, Republic of 41 86 127 0 73 Kyrgyz Republic 7 + 7 * Lao People's Democratic Republic 17 - 17 0 10 Latvia 16 1 17 0 10 Lebanon 26 1 27 0.16 Lesotho 6 + 6 * Liberia - + + Lithuania 5 1 6 * Macedonia, former Yugoslav Republic of 11 7 19 0 11 Madagascar 29 + 29 0.17 Malawi 35 + 35 0 20 Malaysia 8 7 14 0 08 Maldives + - + Mali 22 + 22 0 13 Mauritania 18 + 18 0.11 Mauritius + I I * Mexico 550 4 554 3 21 Moldova 14 + 14 0 08 Mongolia 6 - 6 * Morocco 60 1 61 0 35 Mozambique 41 + 41 0.24 Myanmar - -* Nepal 29 1 30 0 18 Nicaragua 35 - 35 0 20 Niger 22 1 24 0.14 Nigeria 26 1 27 0.15 PakAstan 175 3 178 1 03 Panama 19 1 20 0 11 Papua New Guinea 7 - 7 * Paraguay 30 + 30 0 17 Peru 78 1 79 0 46 Philippines 86 1 87 0.51 Poland 285 6 290 1.68 Romania 51 7 58 0.34 Russian Federation 98 14 112 0.65 Rwanda 3 1 4 * Samoa + - + * Sao Tome and Prncipe 1 - 1 * Senegal 28 10 38 0.22 Seychelles - - -* Sierra Leone 21 1 22 0.13 114 The World Bank Annual Report 2001 Percentage Borrowing Local Foreign Total of total countries procurement procurement amount disbursements' Slovak Republic - + + * Slovenia 2 1 3 * Solomon Islands + - + * Somalia - + + * South Africa 3 53 56 0 32 SriLanka 35 + 35 0 21 St Kitts and Nevis + - + * St Lucia 1 + 1 * St Vincent and the Grenadines - - * Sudan - Suriname - + + * Swaziland 1 2 3 * Syrian Arab Republic - + + * Tajikistan 5 + 5 * Tanzania 37 2 38 0 22 Thailand 135 11 146 0 85 Togo 8 + 8 * Tonga - + + * Trinidad and Tobago 11 2 13 0 08 Tunisia 96 1 97 0 56 Turkey 311 9 321 1 86 Turkmenistan + + + * Uganda 39 2 41 0 24 Ukraine 4 4 7 * Uruguay 38 + 38 0 22 Uzbekistan 3 + 2 * Vanuatu - - -* Venezuela, Repuiblica Bolivarnana de 60 9 69 0 40 Vietnam 106 + 107 0 62 Yemen, Republic of 44 1 44 0 26 Yugoslavia, Federal Republic of - + + Zambia 46 2 48 0 28 Zimbabwe + 6 6 * Total 8,504 581 9,085 52 49 - Zero, + Less than $0 5 million, * Less than 0 05 percent a Countries eligible to borrow from IBRD and IDA are listed in appendix 2 In addition, payments under disbursing loans to Barbados and Cypruis, which are no longer eligible borrowing countnes, are included Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements under simplified procedures for structural and sectoral adjustment loans and disbursements under HIPC Initiative grants b Refers to the share of all IBRD and IDA payments for fiscal 2001, which totaled $17,307 million c Includes supplies from Hong Kong, China Amounts may not add to totals because of rounding IBRD and IDA Payments to Supplying Eligible Borrowing Countries for Local and Foreign Procurement in Fiscal 2001 115 Appendix 4: IBRD and IDA Payments to Supplying Countries for Foreign Procurement (amounts in millions of U.S. dollars) IBRD cumulative IDA cumulative to June 30, 2001 IBRD fiscal 2001 to June 30, 2001 IDA fiscal 2001 Supplying country Amount % Amount % Amount % Amount % Algeria 45 * - * 14 * + * Angola 10 * + * 7 * + * Argentina 925 0 76 28 1 71 140 0.29 2 0 23 Armenia + * - 2 * + * Australia 1,267 1 04 28 1 71 755 1.57 13 1 23 Austria 1,948 1 60 53 3.23 282 0 59 5 0.45 Azerbaijan 3 * * 24 0 05 + * Bahamas, The 101 0 08 + * 18 * 10 0 90 Bahrain 68 0.06 + * 132 0 28 - * Bangladesh 18 * + * 51 0 11 1 0 10 Barbados 16 * + * 5 - * Belarus 55 0 05 + * 2 * + * Belgium 1,620 1 33 12 0.75 1,098 2.28 14 1.36 Benm 7 * 2 0 13 26 0.05 3 0 32 Bolivia 31 * 2 0.12 4 * + * Bosnia and Herzegovina + * * I * I 0 09 Botswana 6 * - * 8 * + * Brazil 1,977 1 62 7 044 358 0 74 2 0 15 Bulgaria 60 0.05 6 0 37 55 0 11 + * Burkina Faso I + 13 * + * Cameroon 5 * - * 27 0 06 + * Canada 2,878 2 36 45 2 76 886 1 84 15 1 38 Central African Republic 4 * * 6 + * Chile 399 0.33 1 0.06 41 0.09 + * China 1,675 1 37 35 2 10 1,648 342 118 1113 Colombia 256 0 21 2 0 10 29 0 06 1 0 09 Costa Rica 68 0 06 2 0 10 45 0 09 + * C6te d'lvoire 50 + * 260 0 54 1 0 10 Croatia 21 * 3 0 18 16 * 3 0.24 Cyprus 112 009 3 0 17 38 008 + * Czech Republic 113 0 09 7 0 39 14 * 4 0 34 Denmark 834 0.68 18 1 07 382 0 79 12 1.10 Djibouti + * * 28 0.06 2 0 19 Dominica 5 - * 2 * + * Dominican Republic 6 * + 10 * 2 0 23 Ecuador 198 0.16 + * 13 1 0.07 Egypt, Arab Republic of 64 0 05 2 0 14 58 0 12 9 0 84 El Salvador 20 * 2 0 09 10 * + * Estonia 6 * 2 0.12 5 * + * Ethiopia 2 * * 7 * + * Finland 625 0 51 13 0.82 159 0 33 4 0 37 France 8,714 7 13 107 6 51 5,079 10 56 71 6 75 Gambia, The 4 + * - * Georgia 14 * + * 8 * I 0 05 Germany 13,865 1135 197 1197 3,844 7 99 38 3 61 Ghana 11 * + * 20 * 2 0 18 Greece 223 0 18 + * 96 0 20 1 0 07 Guatemala 21 * * 29 0 06 + * Guinea 5 * * 42 0 09 1 0 06 Guyana 9 * + * I * * Hungary 352 0.29 2 0.12 29 0 06 + * Iceland 12 * + * 2 * 1 0.05 116 The World Bank Annual Report 2001 IBRD cumulative IDA cumulative to June 30, 2001 IBRD fiscal 2001 to June 30, 2001 IDA fiscal 2001 Supplying country Amount % Amount % Amount % Amount % India 473 0 39 8 0 49 1,065 2 21 25 2 32 Indonesia 180 0 15 1 0 06 139 0 29 1 0 12 Iran, Islamic Republic of 151 0 12 4 0 21 206 0 43 1 0 13 Ireland 210 0 17 2 0 14 146 0 30 8 0 71 Israel 282 0 23 4 0 27 139 0 29 2 0 22 Italy 7,569 6 20 167 10 11 2,256 4 69 84 7 94 Jamaica 17 * * 2 + Japan 15,446 12 64 151 9 15 4,467 9.29 44 4 19 Jordan 50 * 164 0 34 + * Kazakhstan 84 0 07 2 0 10 35 0 07 3 0 24 Kenya 28 ' * 315 0 66 10 0 94 Korea, Republic of 1,852 1.52 30 1 83 1,079 2 24 56 5 27 Kuwait 270 0 22 - ' 261 0 54 3 0 25 Kyrgyz Republic 11 * * + + Latvia 16 * I I I * + * Lebanon 101 0 08 + * 27 0 06 1 0 07 Lesotho + * + * + * Liberia 26 * + * 21 * * Lithuania 25 * 1 0.06 2 * * Luxembourg 75 0 06 1 0 05 37 0 08 1 0 08 Macedonia, former Yugoslav Republic of 2 i 2 0 11 11 * 5 0 51 Madagascar 8 * * 2 * + * Malawi 2 * - 11 * + * Malaysia 350 0 29 3 0 17 267 0 55 4 0 35 Mali + * * 14 * + * Mauritania 8 * * 17 * + * Mauritius 1 * 25 0 05 1 0 12 Mexico 586 048 3 019 116 024 1 009 Moldova 3 * + * I + * Morocco 179 0 15 1 0 05 64 0 13 + * Mozambique 4 * + * 7 ' * Nepal 3 * 1 0 06 7 * + * Netherlands 2,292 1 88 23 1 38 1,386 2 88 25 2.32 New Zealand 197 0.16 3 0 19 133 0 28 11 1 00 Niger 8 * I 0 05 18 * + * Nigeria 391 0 32 + * 409 0 85 + * Norway 553 0.45 6 0.37 180 0 37 3 0 24 Pakistan 130 0 11 3 0 20 186 0 39 + * Panama 405 0 33 1 * 61 0 13 + * Paraguay 121 0 10 + 15 * + * Peru 129 0 11 + * 22 0 05 + Philippines 76 0 06 + * 86 0.18 1 0 05 Poland 326 0 27 5 0 33 55 0 11 + * Portugal 79 0.06 1 * 408 0 85 10 0 98 Romania 334 0.27 7 0 43 76 0 16 + * Russian Federation 762 0 62 6 0 34 110 0 23 9 0 81 Rwanda 3 - * 4 * I 0 10 SaudiArabia 591 0 48 3 0 17 267 0 55 17 1 59 Senegal 29 + 127 0 26 9 0 89 Sierra Leone 5 * + * 4 * I 0 07 Singapore 1,230 1 01 28 1 71 757 1 57 6 061 Slovak Republic 19 * + * 2 - (continued next page) IBRD and IDA Payments to Supplying Countries for Foreign Procurement 117 Appendix 4 (continued) IBRD cumulative IDA cumulative to June 30, 2001 IBRD fiscal 2001 to June 30, 2001 IDA fiscal 2001 Supplying country Amount % Amount % Amount % Amount % Slovenia 57 0.05 1 0.05 13 * 1 0.06 Somalia I * - * 2 * + * South Africa 470 0.38 1 0 07 1,147 2 38 52 4 88 Spain 1,536 1 26 50 3.02 368 0 77 21 2 01 SriLanka 27 * - * 19 * + * St Lucia 9 * * 4 * * Suriname I * - * 2 4 + * Swaziland 38 * 2 0 12 32 0 07 + * Sweden 1,776 1 45 14 0 86 504 1 05 4 0 42 Switzerland 4,704 3 85 39 2.34 1,246 2 59 12 1.18 Synan Arab Republic 38 * - * 18 * + * Tajikistan + * - * + - * Tanzania 7 * - 37 0 08 2 0 15 Thailand 155 0.13 6 0 38 402 0 84 5 0.48 Togo 31 * - * 30 0 06 + * Tonga + I - * 1 * + * Trinidad and Tobago 23 * 1 0 08 24 0 05 1 0 05 Tunisia 92 0.07 - * 44 0.09 1 0.08 Turkey 602 0 49 4 0 22 142 0 30 6 0 55 Turkmenistan 5 * - * 51 0.11 - * Uganda 3 I - * 11 * 2 0 15 Ukraine 172 0.14 3 0.20 56 0 12 + * United Arab Emirates 572 0.47 1 * 381 0 79 2 0 21 United Kingdom 9,069 7.42 95 5.75 6,107 12 69 105 9 94 United States 23,244 19.03 177 10.75 4,684 9.74 58 5 51 Uruguay 114 0.09 + 6 * + * Uzbekistan 5 * - * 14 * + * Venezuela, Repuiblica Bolivariana de 596 0 49 9 0.55 212 0.44 + * Vietnam 46 * - * 55 0 11 + * Yemen, Repubhc of + * - 2 1 0.06 Yugoslavia, Federal Republic of 857 0.70 + * 175 0.36 - * Zambia 52 * - * 117 0 24 2 0.19 Zimbabwe 34 * - * 129 0 27 6 0.58 Others 3,397 2.78 192 11.68 1,023 2 13 94 8 89 Total 122,151 100.00 1,647 100 00 48,104 100.00 1,058 100 00 - Zero, + Less than $0 5 million, Less than 0 05 percent Note Amounts exclude disbursements for debt reduction, net advance disbursements, and disbursements undersimplified procedures for structural and sectoral adjustment loans and disbursements under HIPC Inutiative grants Amounts may not add to totals because of rounding 118 The World Bank Annual Report 2001 Appendix 5: IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal 2001 (amounts in millions of U S dollars) All Total Equipment Civil works Consultants other goods disbursements Supplying country Amount % Amount % Amount % Amount % Amount % Algeria - * - * + + Angola - * - + 0 05 - + Argentina 7 0 53 23 3 35 1 0 13 - * 31 1 13 Armenia - * - * + * * +* Australia 3 0 27 + * 37 6 73 + 0 10 41 1 52 Austria 36 2 90 19 2.79 2 0 32 1 0 31 58 2 14 Azerbaijan - * * + * * + * Bahamas, The 10 0 77 - * * * 10 0 35 Bahratn - * - * + * + * + * Bangladesh - * I 0 10 1 0 10 - * I 0 05 Barbados - * + * * + * Belarus + + - * + * Belgium 18 1 43 4 0 54 5 0 86 1 0.25 27 0 99 Benin + 3 0 48 2 0 40 + 6 0 21 Bolivia - - * 2 0 41 - * 2 0 09 Bosnia and Herzegovina - * I 0 12 + * 1 * Botswana - * - * + * * + * Brazil 4 0 36 2 0 30 2 0 36 + 0 17 9 0 33 Bulgaria 2 0.17 3 0 43 1 0 22 - 6 0 23 Burkina Faso + * + + * * + * Cameroon - * * + * + * Canada 23 1 81 5 0 65 32 5 83 + 023 60 2 22 Central African Republic + * * - * - * + * Chile I 0 06 - 1 0 12 - * 1 0 05 China 29 234 116 16.67 7 1 22 + 006 152 563 Colombia + * 3 047 - * 3 0 10 Costa Rica - - 2 0 34 * 2 0 07 C6te d'lvoire + * + * 1 0 22 - * I 0 05 Croatia 5 0 39 1 0 09 + * 6 0.20 Cyprus 2 0 14 - 1 0 20 + 3 0 11 Czech Republic 10 0 78 + * + 0 05 - * 10 0 37 Denmark 17 1 35 7 1 06 5 0 91 + 29 1 08 Djibouti 2 0 16 - * 2 0 07 Dominica - * * + * * + * Dominican Republic - 2 0 24 1 0.14 - * 2 0 09 Ecuador - * - * 1 0 18 - * I * Egypt, Arab Republic of 4 0 31 5 0 66 3 0 49 - * 11 0 42 El Salvador + * - * 1 0 27 - * 2 006 Estonia + + 005 1 0 26 - * 2 008 Ethiopia - - * + 0 06 - * + * Finland 13 1 02 - 2 041 2 1 15 17 064 France 87 6 99 52 7.48 36 6 50 3 1 59 179 6 60 Gambia, The - - * + - * + * Georgia + * 1 0 11 + 011 1 * Germany 154 12.36 33 4 70 37 6 67 12 5 63 235 8 70 Ghana - * + 0 05 2 0 31 - * 2 0 08 Greece 1 0 10 + + + 0 15 1 * Guatemala - * - 1 0 12 - * I * (continued next page) IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal 2001 119 Appendix 5 (continued) All Total Equipment Civil works Consultants other goods disbursements Supplying country Amount % Amount % Amount % Amount % Amount % Guinea I 0 05 - + I - I * Guyana - * - + * - + * Hungary 2 0 15 - * + * + * 2 0 08 Iceland + * + * + 009 - I 1 * India 26 2 07 + * 7 1.23 - * 33 1.21 Indonesia I 0 10 1 0.15 + * - 2 0.08 Iran, Islamic Republic of + 4 0 64 + * - * 5 0 18 Ireland 2 0 18 - * 8 1 35 + * 10 0.36 Israel 3 0.24 + * 3 0 63 + 0 07 7 0.25 Italy 57 4 54 179 25 64 10 1 75 6 2 66 251 9 26 Jamaica # # + * * + * Japan 153 12.27 37 5 23 5 0 82 1 0 69 195 7 21 Jordan + * - * + Kazakhstan 4 0.32 - + * - * 4 0 16 Kenya 7 0 56 2 0 29 1 0.16 - * 10 0 37 Korea, Republic of 28 2 21 51 7.27 + * 8 3.65 86 3.17 Kuwait I 0 08 2 0 23 - * - * 3 0 10 Kyrgyz Republic - * - * + * - * + * Latvia I 0 05 - + 0 07 - I 1 * Lebanon 1 0.06 - * I 0.10 - * 1 0.05 Lesotho + * - * - * - * + * Liberia * - + * * + * Lithuania 1 008 - I - * - * 1 Luxembourg 1 0.07 - 1 0 17 - * 2 0 06 Macedonia, former Yugoslav Republic of - * 7 1 05 - * - * 7 0.27 Madagascar + * - * - * - + * Malawi - + - * - * + # Malaysia 2 0 18 4 0.55 + 0 08 - * 7 0.24 Mall - - # + # - * + # Mauritania + - # - # + # + # Mauntius I 0 07 - * + 0.06 + I 1 0 05 Mexico I 0 09 1 0 09 2 0.40 - * 4 0 15 Moldova + * - * + * + Morocco I 0 06 - * + I- I * Mozambique - # - # + * - * + # Nepal 1 008 - * + * - * I * Netherlands 23 1 84 2 0 29 22 3 89 1 0.38 47 1 75 New Zealand + * 3 0 43 10 1 88 + * 14 0 50 Niger I 0 07 - * + 0 08 - I 0 05 Nigeria - + 0 05 + 0.05 - * I * Norway 5 0.40 + 0.05 2 0.42 1 0 48 9 0 32 Pakistan 3 0 22 + * + 1 1 0 27 3 0 13 Panama + * * I 013 - * I Paraguay * + * + * * + * Peru * - * 1 0 10 - 1 * Philippines - - 1 0 18 - I 1 * Poland 4 035 + * 1 0 15 1 024 6 0.21 Portugal 3 0 21 5 0 72 3 0.59 + * 11 0 41 Romania 3 0 25 2 0 24 + * 3 1 23 7 0.27 Russian Federation 13 1 03 + * 1 0.12 + 0 21 14 0 52 Rwanda 1 008 - I - - * 1 * 120 The World Bank Annual Report 2001 All Total Equipment Civil works Consultants other goods disbursements Supplying country Amount % Amount % Amount % Amount % Amount % Saudi Arabia 9 0.75 10 1 49 - * + 20 0 73 Senegal + * 8 1 12 1 023 + 0 15 10 035 Sierra Leone + * 1 0 14 - I I Singapore 30 2 43 - * 2 0 39 2 1 04 35 1 28 Slovak Republic + * * + * * + * Slovenia + * 1 0 11 + 0 06 - * 1 0 05 Somalia - # - * + * * + * South Africa 23 1.82 24 3.40 6 1 15 - * 53 1 95 Spain 16 1.26 31 4 45 20 3 53 5 2 18 71 2 62 SriLanka + i * + * - + * St Lucia - * - * - * - - * Suriname - * - * + * - * + * Swaziland 2 0 18 - * + ^ - * 2 0 08 Sweden 15 1 22 - * 3 060 + 007 19 069 Switzerland 34 2.70 2 0 33 6 1 00 10 4 60 51 1 89 Syrian Arab Republic - i - * + * - * + Tajikistan - - - - Tanzania 1 0 09 + * + * * 2 0 06 Thailand 6 046 5 0 69 1 0 15 - 11 0 42 Togo - * - * + * * + * Tonga - * + * * + Trinidad and Tobago + * 2 0 29 - * 2 0 07 Tunisia - + 1 0 09 - * I * Turkey 4 0 35 4 0 58 1 0 17 + * 9 0 35 Turkmenistan - - - -- Uganda 1 0 08 + 0 05 + * + 0 11 2 0 06 Ukraine 1 0 06 - + * 3 1 35 4 0 14 United Arab Emirates 1 0.10 2 0 23 - - * 3 0 11 United Kingdom 101 8 15 18 2 53 80 14 35 1 0 55 200 7 39 United States 134 10 78 5 0 66 93 16.78 3 1 64 235 8 70 Uruguay + * * + * + * Uzbekistan + - * - * - # + * Venezuela, Republica Bolivariana de - * + * 1 0 23 8 3 75 9 0 34 Vietnam + * + * * + Yemen, Republic of 1 - * + - * I Yugoslavia, Federal Republic of + - * - - * + * Zambia 1 0 05 1 0 20 + * * 2 0 08 Zimbabwe + * 4 0.54 2 0 35 - * 6 0 23 Others 86 6 58 5 0 74 61 10 91 134 64 59 286 10 43 Total 1,244 100 00 698 100 00 556 100.00 208 100 00 2,705 100 00 - Zero, + Less than $0 5 million, ' Less than 0 05 percent Note Amounts excltude disbursements for debt reduction, net advance disbursemenits, and disbursements tinder simplified procedures for strulctur- al and sectoral adjustment loans and disbursements under HIPC Initiative grants Amotunts may not add to totals because of rounding IBRD and IDA Payments to Supplying Countries for Foreign Procurement, by Description of Goods, Fiscal 2001 121 Appendix 6: IBRD and IDA Disbursements for Foreign Expenditures, by Description of Goods (for Investment Lending), Fiscal 1999-2001a Fiscal 1999 Fiscal 2000 Fiscal 2001 Countries Countries Countries Countries Countries Countries not eligible eligible not eligible eligible not eligible eligible Item to borrow to borrow Total to borrow to borrow Total to borrow to borrow Total Millions of US dollars Civd works 586 286 871 456 286 742 420 278 698 Consultants 615 87 702 541 91 632 484 69 553 Goods 1,977 441 2,417 1,504 336 1,840 1,003 207 1,210 AH other 107 3 110 133 6 139 155 24 179 Total 3,285 817 4,100 2,634 719 3,353 2,062 578 2,640 Percentb Civil works 67 33 21 61 39 22 60 40 26 Consultants 88 12 17 86 14 19 88 12 21 Goods 82 18 59 82 18 55 83 17 46 All other 98 2 3 96 4 4 87 13 7 Total 80 20 100 79 21 100 78 22 100 Note Countries eligible to borrow from IBRD and IDA are listed in appendix 2 For consistency of companson, the Republic of Korea and the Federal Republic of Yugoslavia are included as countries eligible to borrow for all periods covered by this table The Republic of Korea (a former graduate) again became eligible to borrow in December 1997 The Federal Republic of Yugoslavia's eligibility was re-established in May 2001 a Amounts exclude disbursements for debt-reduction and net advance disbursements Amounts also exclude disbursements for structural and sec- toral adjustment loans, and hybrids (loans that support policy and institutional reforms in a specific sector by financing both a policy component disbursed against imports and investment component), and disbursements under HIPC Initiative grants b Percentages are based on the dollar amounts shown under the total disbursements section These percentages show both the breakdown between countres eligible to borrow from the IBRD and/or IDA, and countries not eligible to borrow, for individual goods categories and the share of each goods category compared with total disbursements 122 The World Bank Annual Report 2001 Appendix 7: Estimates of IBRD and IDA Payments to Supplying Countries for Foreign Procurement under Adjustment Lending, Fiscal 2001a (amounts in miiions of U S. dollars) Stipplying countries Amotint Percent Supplying countries Amount Percent Albania + 0 0 Japan 276 3 5 1 Algeria 23 6 0 4 Jordan 0 6 0 0 Argentina 199.9 3 7 Kazakhstan 15 6 0 3 Aruba + 0 0 Kenya 55 1 1 0 Australia 33 2 0.6 Korea, Republic of 127 6 2 4 Austria 30.5 0 6 Kuwait 3 4 0 1 Azerbaijan 2 2 0.0 Kyrgyz Republic 0 8 0 0 Bangladesh 2 9 0.1 Latvia 3 5 0 1 Barbados 0 6 0 0 Lithuania 7 2 0 1 Belarus 35.2 0 7 Macedonia, former Belgium 106 0 2 0 Yugoslav Republic of I1 0 0 Belize + 0 0 Madagascar + 0 0 Benin 1 4 0.0 Malaysia 72 2 1 3 Bolivia 6 8 0 1 Malta + 0 0 Brazil 173 0 3 2 Mauritius 7 1 0 1 Brunei 0.8 0 0 Mexico 36 5 0 7 Cameroon + 0.0 Moldova 2 6 0 0 Canada 60 4 1.1 Morocco 8 3 0 2 Chile 48 1 0 9 Nepal + 0 0 China 132 1 2 4 Netherlands 81 0 1 5 Colombia 20 8 0 4 New Zealand 7 8 0 1 Costa Rica 7.2 0 1 Nicaragua + 0 0 Croatia 11 5 0 2 Niger + 0 0 Cyprus 0 7 0 0 Nigeria 18 1 0.3 Czech Republic 13.6 0 3 Norway 13 3 0 2 Denmark 23 1 0.4 Oman 11 8 0 2 Ecuador 6 9 0 1 Pakistan 9 6 0 2 Egypt, Arab Republic of 4 1 0 1 Panama 0.5 0 0 El Salvador 1.4 0 0 Papua New Guinea + 0 0 Estonia 6.2 0 1 Paraguay 10 4 0 2 Finland 37 2 0.7 Peru 9 1 0 2 France 307 2 5 7 Philippines 5 2 0 1 Gambia, The + 0 0 Poland 33.0 0 6 Germany 452 6 8 4 Portugal 14.4 0 3 Ghana 0 8 00 Romania 11 1 0 2 Greece 18 4 0 3 Russian Federation 120 1 2 2 Grenada + 0 0 Saudi Arabia 15 7 0 3 Guatemala 3 6 0 1 Senegal 6.1 0 1 Honduras 0 6 0 0 Singapore 61 5 1 1 Hungary 19 4 0 4 Slovak Repubic 5.4 0 1 Iceland 0 5 0 0 Slovenia 10 0 0 2 India 44 5 0 8 South Africa 110 8 2 1 Indonesia 33 0 0 6 Spain 118 7 2 2 Iran, Islamic Republic of 7 5 0 1 St Lucia + 0 0 Ireland 18 6 0.3 St Vincent and Israel 20.7 0 4 the Grenadines + 0 0 Italy 287 2 5 4 Sudan 10 0 0 (continued next page) Estimates of IBRD and IDA Payments to Supplying Countries for Foreign Procurement under Adjustment Lending, Fiscal 2001 123 Appendix 7 (continued) Supplying countries Amount Percent Surname + 0 0 Sweden 61 4 1 1 Switzerland 58.4 1.1 Syrian Arab Republic 5.3 0.1 Taiwan, China 60.2 1.1 Tanzania 5.6 0 1 Thailand 27.7 0.5 Togo 1.3 00 Trinidad and Tobago 8.2 0.2 Tunisia 2.6 0.0 Turkey 34.0 0.6 Uganda 7.1 0 1 United Kingdom 198.1 3.7 United States 1,327.1 24 7 Uruguay 30.6 0.6 Venezuela, Repiblhca Bolivarsana de 27 2 0 5 Yemen, Republic of 2.0 0.0 Yugoslavia, Federal Republic of 12.0 0.2 Total 5,366.2 100 + Amount below $0 5 million Note Amounts exclude disbursements under investment lending See appendix 4 for payments to supplying countries for foreign procurement under investment lending, fiscal 2001 a Based on import data drawn from the latest information available on borrowers' trade statistics compiled by the United Nations trade system COMlTRADE Amounts may not add to totals because of rounding 124 The World Bank Annual Report 2001 Appendix 8: IBRD and IDA Cumulative Lending Since Fiscal 1990 by Major Purpose and Region, June 30, 2001 (amounts in millions of U.S. dollars) IBRD loans to borrowers, by region' Europe Latin Middle East Asia and America East and and Central and the North South Purposeb Africa Pacific Asia Caribbean Africa Asia Total Agriculture 569 0 6,406 9 2,891 5 5,569 5 2,301 9 696 5 18,435 3 Economic Policy 155 0 3,865 0 8,578 1 5,066 8 1,465.0 900 0 20,029 9 Education 161 0 3,403 8 1,119 9 5,778 8 973 1 25 0 11,461 5 Electric Power and Other Energy 275 0 9,413 8 3,383 1 1,920 3 644 0 4,988 0 20,624 3 Environment 21 9 2,096.4 354 3 2,519.6 186 5 310 0 5,488 7 Finance 177 4 7,031 8 4,190 4 8,285 5 1,109.0 1,311 0 22,105 1 Health, Nutrition, and Population 163 1 860 1 1,203 0 4,213 9 689 1 20 0 7,149 2 Industry 488 3 464.5 601 4 1,554 2 Mining 10 0 1,985 3 533 5 43 0 530 0 3,101 8 Multisector 625 0 1,876 5 2,589 5 873 5 351 3 6,315 8 Oil and Gas 310 9 929.0 1,880 8 484.2 264 0 848 0 4,716 9 Private Sector Development 10 0 316 5 2,185 3 1,566 8 264 7 226 0 4,569 3 Public Sector Management 89 0 1,773 0 1,414 7 6,100 1 344 9 351 3 10,073 0 Social Protection 72.9 1,636 4 2,053 8 4,179 9 226 0 8,169 0 Telecommunications 225 0 1,585.7 465 0 37 9 194 0 97 0 2,604 6 Transportation 123 7 9,967 1 4,395 5 8,249 9 614.7 2,769 9 26,120 8 Urban Development 1624 2,4398 2,1180 2,3042 1,8307 1050 8,9601 Water Supply and Sanitation 503 4 1,257 1 1,301 7 2,653 8 748 1 512 4 6,976 5 Total 3,019 8 54,105 6 41,397 0 62,054 2 13,236 6 14,642 8 188,456 0 Note Figures are cumulative since fiscal 1990, the first year for which reclassified sector data is available (see table I 1, page 26 in The W4'orld Batk Annual Report 2001 Volunie 1, Year in Revteiv) a No account is taken of cancellations subsequent to original commitment IBRD loans to the IFC are excluded b Operations have been classified by the major purpose they finance Many projects include activity in more than one sector or subsector Amounts may not add to totals because of rounding (continued next page) IBRD and IDA Cumulative Lending Since Fiscal 1990 by Major Purpose and Region, June 30, 2001 125 Appendix 8 (continued) IDA credits to borrowers, by region' Europe Latin Middle East Asia and America East and and Central and the North South Purposeb Africa Pacific Asia Caribbean Africa Asia Total Agriculture 3,643 1 4,048.8 592 3 288 6 491 2 4,596 9 13,660 9 Economic Polhcy 5,047.8 664.0 1,306 3 382.7 800 875 2 8,356.0 Education 2,648 1 1,040 1 109 1 381.0 347.5 3,700 0 8,225 8 Electric Power and other Energy 1,644.2 872 7 304.5 86 5 69.5 683 5 3,660 9 Environment 476 3 514.9 42 3 194 5 15 0 906 6 2,149.6 Finance 1,750.1 260.9 182 3 163.7 80.0 798 1 3,235 1 Health, Nutrition, and Population 2,168.5 1,019 8 154 2 182 6 175.6 4,016.0 7,716.7 Industry 82 0 82 0 Mining 123.4 35 0 77 0 235.4 Multisector 1,407 5 97.7 55.0 395.1 543 3 2,498 6 Oil and Gas 372 0 62 0 61 2 15 0 188.0 698 2 Private Sector Development 1,901 5 17 0 193 8 208 2 10 9 479.5 2,810.9 Public Sector Management 1,675 2 100.0 335 7 355 5 99 5 726.1 3,292.1 Social Protection 1,582.8 459 2 360.0 485.8 494 8 577.0 3,959 6 Telecommunications 122.8 24 5 18 0 18 3 112 0 295 6 Transportation 3,921 2 1,185 9 350 8 567 9 134.8 1,569 1 7,729 8 Urban Development 1,274.6 732 9 195.8 71 5 101 2 322 0 2,698 0 Water Supply and Sanitation 1,263.3 634 6 137 7 81 5 67 2 816 2 3,000.5 Total 31,104.5 11,708 0 4,399 8 3,924.6 2,182 2 20,986 6 74,305 7 Note Figures are cumulative since fiscal 1990, the first year for which reclassified sector data is available (see table 1 1, page 26 in The World Bank Antnual Report 2001 Volume 1, Year in Review) a No account is taken of cancellations subsequent to original commitment IBRD loans to the IFC are excluded b Operations have been classified by the major purpose they finance Many projects include activity in more than one sector or subsector Amounts may not add to totals because of rounding 126 The World Bank Annual Report 2001 Appendix 9: IBRD and IDA Cumulative Lending by Country, June 30, 2001 (amounts in millions of U.S. dollars) IBRD loans IDA credits Total Country Number Amount Number Amount Number Amount Afghanistan 20 230 1 20 230 1 Africa 11 259 8 2 50 5 13 310 3 Albania 42 569 4 42 569 4 Algeria 67 5,697 7 67 5,697 7 Angola 11 3108 11 3108 Argentina 110 18,2124 110 18,2124 Armenia 1 12 0 23 644 8 24 656 8 Australia 7 417 7 7 417 7 Austria 9 106 4 9 106 4 Azerbaijan 16 461 6 16 461 6 Bahamas, The 5 42.8 5 42 8 Bangladesh 1 46 1 169 9,592 4 170 9,638 5 Barbados 12 1183 12 1183 Belarus 4 192 8 4 192 8 Belgium 4 76 0 4 76 0 Belize 9 86.2 9 86 2 Benin 51 743 5 51 743 5 Bhutan 9 64 3 9 64.3 Bolivia 14 299 3 64 1,669 2 78 1,968 5 Bosnia and Herzegovina 35 709 5 35 709 5 Botswana 19 280 7 6 15 8 25 296 5 Brazil 266 30,379.4 266 30,379 4 Bulgaria 26 1,533.1 26 1,533 1 Burkina Faso 1 9 53 1,063 9 53 1,065 8 Burundi 1 4 8 50 788 5 51 793 3 Cambodia 16 430 1 16 430 1 Cameroon 45 1,347.8 27 1,120 5 72 2,468 3 Cape Verde 15 154 4 15 154 4 Caribbean 4 83 0 2 43 0 6 126 0 Central African Republic 26 431 5 26 431 5 Chad 1 39 5 39 771 9 40 811 4 Chile 60 3,585.9 19.0 60 3,604 9 China 163 25,566.3 71 9,946.7 234 35,513 0 Colombia 160 10,017.1 19 5 160 10,036 6 Comoros 17 113 1 17 113 1 Congo, Democratic Republic of 7 3300 59 1,151 5 66 1,481 5 Congo, Republic of 10 216 7 10 183.6 20 400 3 Costa Rica 39 921.5 5 5 39 927 0 Cote d'lvoire 62 2,887 9 24 1,830 5 86 4,718 4 Croatia 17 781 6 17 7816 Cyprus 30 418 8 30 418 8 Czech Republic 3 776.0 3 776 0 Denmark 3 85 0 3 85 0 Djibouti 13 100.6 13 100 6 Dominica 1 3.1 3 14.1 4 17 1 Dominican Republic 31 896 7 3 22 0 34 918 7 Eastern Africa 1 45 0 1 45 0 Ecuador 69 2,656 3 5 36 9 74 2,693 2 (continued next page) IBRD and IDA Cumulative Lending by Country, June 30, 2001 127 Appendix 9 (continued) IBRD loans IDA credits Total Country Number Amount Number Amount Number Amount Egypt, Arab Republic of 63 4,497 5 41 1,984 0 104 6,481.5 El Salvador 32 820 6 2 25 6 34 846 2 Equatorial Guinea 9 45 0 9 45.0 Eritrea 9 320 4 9 320 4 Estonia 8 150.7 8 150.7 Ethiopia 12 108 6 67 3,569 5 79 3,678 1 Fiji 12 152 9 12 152 9 Finland 18 316 8 18 316 8 France 1 250.0 1 2500 Gabon 14 227 0 14 227.0 Gambia, The 26 228 2 26 228 2 Georgia 28 647.1 28 647 1 Ghana 9 207 0 99 3,685 9 108 3,892 9 Greece 17 490 8 17 490.8 Grenada 2 8 9 1 13 8 3 22 7 Guatemala 35 1,140 6 35 1,140 6 Guinea 3 75 2 54 1,148 2 57 1,223 4 Guinea-Bissau 22 259.9 22 259.9 Guyana 12 80.0 17 307 6 29 387.6 Haiti 1 2 6 36 626 5 37 629.1 Honduras 33 717 3 28 1,218.1 61 1,935 4 Hungary 40 4,333 6 40 4,333 6 Iceland 10 47 1 10 47 1 India 183 28,797 4 241 27,548 1 424 56,345 5 Indonesia 245 27,340.1 49 1,397 6 294 28,737.7 Iran, Islamic Repubhc of 41 2,290 1 41 2,290 1 Iraq 6 156 2 6 156.2 Ireland 8 152.5 8 152.5 Israel 11 284.5 11 284 5 Italy 8 399 6 8 399.6 Jamaica 63 1,401 0 63 1,401.0 Japan 31 862 9 31 862 9 Jordan 52 2,036.7 15 85 3 67 2,122.0 Kazakhstan 22 1,883 6 22 1,883 6 Kenya 45 1,200.7 78 3,221.0 123 4,421 7 Korea, Republic of 113 15,647.0 6 110.8 119 15,757.8 Kyrgyz Republic 24 606 4 24 606 4 Lao People's Democratic Republic 29 617 7 29 617 7 Latvia 17 393.7 17 393 7 Lebanon 18 940 1 18 940 1 Lesotho 2 155 0 29 331 8 31 486 8 Liberia 19 156 0 14 114 5 33 270 5 Lithuania 15 448 4 15 448 4 Luxembourg 1 12 0 1 12.0 Macedonia, former Yugoslav Republic of 10 252 0 12 343 7 22 595 7 Madagascar 5 32 9 79 2,120 7 84 2,153 5 Malawi 9 124.1 69 1,948 1 78 2,072 2 Malaysia 87 4,150 6 87 4,150 6 Maldives 7 64 9 7 64 9 Mali 1 9 63 1,451.8 63 1,453.7 Malta 1 7.5 1 7 5 Mauritania 3 146 0 46 614.2 49 760 2 128 The World Bank Annual Report 2001 IBRD loans IDA credits Total Country Number Amount Number Amount Number Amount Mauritius 31 417 8 4 20 2 35 438 0 Mexico 178 33,161 0 178 33,161 0 Moldova 9 302 8 7 156 0 16 458 8 Mongolia 14 2717 14 2717 Morocco 127 8,5404 3 50 8 130 8,591 2 Mozambique 38 1,991 6 38 1,991 6 Myanmar 3 33 4 30 804.0 33 837 4 Nepal 71 1,612 0 71 1,612 0 Netherlands 8 244 0 8 244 0 New Zealand 6 126 8 6 126 8 Nicaragua 27 233 6 30 1,057 6 57 1,291 2 Niger 48 922 1 48 922 1 Nigeria 84 6,248 2 19 1,157 2 103 7,405 4 Norway 6 145 0 6 145 0 OECS Countries 2 104 7 1 2 17 5 Oman 11 157.1 11 157 1 Pakistan 84 6,614.2 110 5,842 4 194 12,456 7 Panama 44 1,262 7 44 1,262 7 Papua New Guinea 33 729 3 9 113 2 42 842 5 Paraguay 36 807.9 6 45 5 42 853 4 Peru 87 5,298 2 87 5,298 2 Philippines 154 11,008 7 5 294 2 159 11,302 9 Poland 36 5,284 8 36 5,284 8 Portugal 32 1,338 8 32 1,338 8 Romania 64 5,438 4 64 5,438 4 Russian Federation 49 12,209 0 49 12,209 0 Rwanda 53 1,048 0 53 1,048 0 Samoa 10 66 0 10 66 0 Sao Tome and Prncipe 10 68 9 10 68 9 Senegal 19 164 9 79 2,118 2 98 2,283 0 Seychelles 2 10.7 2 10 7 Sierra Leone 4 18 7 24 472 2 28 490 9 Singapore 14 1813 14 1813 Slovak Republic 2 135.0 2 135 0 Slovenia 5 177 7 5 177 7 Solomon Islands 8 49 9 8 49 9 Somalia 39 492 1 39 492 1 South Africa 12 287 8 12 287 8 Spain 12 478 7 12 478 7 Sri Lanka 12 210 7 76 2,353.7 88 2,564 4 St Kitts and Nevis 2 15.6 7.0 2 22.6 St Lucia 4 10 0 12 7 4 22 7 St Vincent and the Grenadines 1 1 4 1 6 4 2 7 8 Sudan 8 166 0 47 1,352 9 55 1,518 9 Swaziland 12 104 8 2 7 8 14 112 6 Syrian Arab Republic 17 613 2 3 47 3 20 660 5 Taiwan, China 14 329 4 4 15.3 18 344 7 Tajikistan 14 261 3 14 261 3 Tanzania 17 318 9 98 3,508 6 115 3,827 5 Thailand 118 7,979 1 6 125 1 124 8,104 2 Togo 1 200 41 733 5 42 753 5 Tonga 2 5 0 2 5 0 Trinidad andTobago 21 313.6 21 313 6 Tunisia 114 4,701 6 5 74.6 119 4,776 2 (continued next page) IBRD and IDA Cumulative Lending by Country, June 30, 2001 129 Appendix 9 (continued) IBRD loans IDA credits Total Country Number Amount Number Amount Number Amount Turkey 131 16,567.9 10 178 5 141 16,746 4 Turkmenistan 3 89 5 3 89 5 Uganda 1 9 1 78 3,220 7 79 3,229 8 Ukraine 19 2,892 5 19 2,892.5 Uruguay 47 1,754.6 47 1,754 6 Uzbekistan 10 463 0 10 463.0 Vanuatu 5 18 9 5 18.9 Venezuela, Reptblhca Bolivariana de 40 3,328.4 40 3,328 4 Vietnam 31 3,269.4 31 3,269 4 WesternAfnca 1 6 1 4 61.9 5 68 0 Yemen, Republic of 122 1,918 1 122 1,918.1 Yugoslavia, Federal Republic of 90 6,114.7 90 6,114 7 Zambia 27 679.1 51 2,485.6 78 3,164 7 Zimbabwe 24 983.2 12 661 9 36 1,645 1 Total 4,523 360,020 1 3,311 126,997.3 7,834 487,017.4 Note Joint IBRD/IDA operations are counted only once, as IBRD operations When more than one loan is made for a single project, the operation is counted only once Amounts may not add to totals because of rounding 130 The World Bank Annual Report 2001 Appendix 10: Projects Approved for IBRD and IDA Assistance in Fiscal 2001, by Region, July 1, 2000-June 30, 2001 (amounts in millions of U.S. dollars) IBRD loans IDA credits Totals Country Number Amount Number Amount Number Amount Africa Africa (regionwide) 1 5 0 1 5 0 Benin 1 10 0 1 10 0 Burkina Faso 2 136 7 2 136 7 Burundi 2 47 5 2 47 5 Cameroon 1 57 8 1 57 8 Cape Verde 1 5 0 1 5 0 Chad 1 67 0 1 67 0 Comoros 1 11 4 1 11 4 Eritrea 3 170 0 3 1700 Ethiopia 7 666 8 7 666 8 Gambia, The 1 15 0 1 15 0 Ghana 2 1410 2 1410 Kenya 5 3502 5 350 2 Lesotho 1 28 6 1 28 6 Madagascar 2 267 6 2 267 6 Malawi 3 73 6 3 73 6 Mali 1 704 1 704 Mauritania 1 18 3 1 18 3 Mozambique 1 18 0 1 18 0 Niger 2 95 2 2 95 2 Nigeria 2 174 3 2 174 3 Rwanda 3 1186 3 1186 Sao Tome and Principe 2 10 0 2 10 0 Senegal 3 255 0 3 255 0 Sierra Leone 1 13 5 1 13 5 Tanzania 2 75 8 2 75 8 Uganda 6 358 4 6 358 4 Western Africa 1 9 4 1 9 4 Zambia 3 99 5 3 99 5 Total 60 3,369 6a 60 3,369 6a East Asia and Pacific Cambodia 1 45 0 1 45 0 China 7 787 5 7 787 5 Indonesia 3 283 8 1 209 4 4 493 2 Lao People's Democratic Republic 2 417 2 41 7 Mongolia 2 64 0 2 64 0 Philippines 2 64 8 2 64 8 Samoa 1 5 0 1 5 0 Vanuatu 1 3.5 1 3 5 Vietnam 4 629 1 4 629 1 Total 12 1,136.1 12 997 7 24 2,133 8 Europe and Central Asia Albania 3 28 0 3 28 0 Armenia 2 614 2 614 Azerbaijan 3 50 4 3 50 4 Belarus 1 22 6 1 22 6 Bosnia and Herzegovina 7 124 3 7 124 3 Bulgaria 4 102 4 4 102.4 Croatia 2 18 9 2 18 9 Georgia 4 89 9 4 89 9 Kazakhstan 1 64 5 1 64 5 Kyrgyz Republic 3 72 0 3 72 0 Latvia 2 384 2 38 4 Lithuania 1 98 5 1 98 5 (continued next page) Projects Approved for IBRD and IDA Assistance in Fiscal 2001, by Region, July 1, 2000-June 30, 2001 131 Appendix 10 (continued) IBRD loans IDA credits Totals Country Number Amount Number Amount Number Amount Macedonia, former Yugoslav Republic of 2 46 5 3 49 9 5 96 4 Moldova 1 10 0 1 10 0 Poland 3 154 5 3 154 5 Romania 2 130 0 2 130 0 Russian Federation 5 397 5 5 397 5 Tajlkistan 1 53 1 1 53 1 Turkey 2 1,027 8 2 1,027 8 Ukraine 2 52 5 2 52 5 Total 27 2,154 1 27 539 0 54 2,693 1 Latin America and the Caribbean Argentina 5 440 7 5 440 7 Barbados 1 15 1 1 15 1 Belize 1 14 4 1 14 4 Bolivia 3 100 0 3 100 0 Brazil 10 1,676 6 10 1,676 6 Colombia 2 185 5 2 185 5 Dominican Republic 2 28 4 2 28 4 Ecuador 1 32 0 1 32 0 Grenada 1 5 1 1 5 0 1 10 1 Guatemala 2 82 5 2 82 5 Honduras 5 206 2 5 206 2 Jamaica 1 75 0 1 75 0 Mexico 5 1,982.2 5 1,982 2 Nicaragua 5 182 2 5 182 2 Panama 2 82 9 2 829 Peru 2 150 0 2 150 0 Uruguay 1 6 0 1 6 0 Vene7uela, Repoblica Bolivariana de 1 30 3 1 30 3 Total 37 4,806 7b 13 493 4 50 5,300 lb Middle East and North Africa Algeria 2 41 7 2 41 7 Djibouti I 10 0 1 10 0 Jordan 1 120 0 1 120 0 Lebanon 1 20 0 1 200 Morocco 2 97 6 2 97 6 Tunisia 3 75 9 3 75 9 Yemen, Republic of 4 142 3 4 142 3 Total 9 355 2 5 152 3 14 507 5 South Asia Bangladesh 5 279 6 5 279 6 India 6 2,035 0 6 520 3 12 2,555 3 Pakistan 3 374 3 3 374 3 Sn Lanka 3 37 3 3 37 3 Total 6 2,0350 17 1,211 5 23 3,2465 Bank-wide total 91 10,487 1 134 6,763 5 225 17,250 6 Note Supplements are included in the amount but are not counted as separate lending operations Joint IBRD/IDA operations are counted only once, as IBRD operations a Includes $287 2 million in IDA credits to seven countries under the Multi-Country HIV/AIDS Program for Africa, for which the Bank ear- marked $500 million in fiscal 2001 Excludes an IDA HIPC grant of $64 million to Cameroon in fiscal 2001 b Includes $40 l million in IBRD loans to two countries under the Canbbean HIV/AIDS Initiative, for which the Bank earmarked $155 mil- lion in fiscal 2001 Total excludes an IDA HIPC grant of $37 million to Honduras in fiscal 2001 Amounts may not add to totals because of rounding 132 The World Bank Annual Report 2001 Appendix 11: Projects Approved for IBRD and IDA Assistance in Fiscal 2001, by Purpose, July 1, 2000-June 30, 2001 (amounts in millions of U.S. dollars) Sector Group/Country IBRD IDA Total Agriculture Albania 9 9 9 9 Argentina 5 0 5 0 Brazil 346 6 346 6 Bulgaria 50 0 50 0 Burkina Faso 66 7 66 7 China 74 0 74 0 Ethiopia 46.6 46 6 Georgia 27 0 27 0 Ghana 67 0 67 0 Honduras 8 0 8 0 India 210 5 210 5 Kazakhstan 64.5 64 5 Lao People's Democratic Republic 16.7 16 7 Madagascar 89 0 89 0 Morocco 32 6 32 6 Pakistan 21 3 21 3 Romania 80.0 80 0 Rwanda 48.0 48 0 Tajikistan 3 1 3 1 Tunisia 21 3 21 3 Uganda 45 0 45 0 Vietnam 102 8 102 8 Yemen, Republic of 21 3 21 3 Total 674 0 782 9 1,456 9 Economic Policy Africa 5 0 5 0 Benin 10.0 10 0 Cameroon 7 8 7 8 Ethiopia 150 0 150 0 Ghana 49 0 49 0 Kyrgyz Republic 35 0 35 0 Lithuania 98 5 98 5 Madagascar 50 5 50 5 Malawi 58 6 58.6 Mali 25 4 25.4 Pakistan 350 0 350 0 Rwanda 15 3 15 3 Senegal 100.0 100 0 Sierra Leone 10 0 10 0 Tajikistan 50 0 50 0 Tanzania 0 8 0 8 Uganda 25.4 25 4 Vietnam 250 0 250 0 Zambia 32 5 32 5 Total 98 5 1,225 3 1,323 8 Education Argentina 57 0 57 0 Bangladesh 53 3 53 3 Brazil 159.6 159 6 Bulgaria 14 4 14 4 Djibouti 10 0 10 0 Dominican Republic 3 4 3 4 Ethiopia 4 9 4 9 (continued next page) Projects Approved for IBRD and IDA Assistance in Fiscal 2001, by Purpose, July 1, 2000-June 30, 2001 133 Appendix 11 (continued) Sector Group/Country IBRD IDA Total Education (continued) Georgia 25 9 25 9 Guatemala 62.2 62 2 Honduras 45 5 45 5 India 139.3 139.3 Indonesia 4 1 4 1 Mali 45.0 45 0 Panama 35 0 35 0 Russian Federation 50 0 50 0 Vanuatu 3 5 3 5 Yemen, Republic of 56 0 56.0 Zambia 25 0 25.0 Total 3816 412 5 794 1 Electric Power and Other Energy Belarus 22 6 22 6 Bosnia and Herzegovina 35 0 35 0 Georgia 27.4 27 4 India 630 0 630 0 Latvia 36 2 36 2 Mongolia 30.0 30 0 Poland 15 0 15 0 Ukraine 28 2 28 2 Total 732.0 92 4 824.4 Environment Bulgaria 300 30 0 Latvia 2.2 2 2 Mexico 404.0 404 0 Panama 47.9 47.9 Phllippines 4 8 4 8 Sri Lanka 5 0 5 0 Uganda 22.0 22.0 Total 488.9 27 0 515 9 Finance Azerbaijan 5 4 5 4 Bangladesh 151.0 151 0 Bosnia and Herzegovma 20.0 20 0 Brazil 404.0 404.0 Burundi 7 5 7.5 China 8.0 8 0 Eritrea 90 0 90 0 Jamaica 75 0 75 0 Kenya 25 0 25 0 Macedonia, former Yugoslav Republic of 30.3 20 0 50 3 Malawi 15 0 15.0 Mexico 505 1 505.1 Rwanda 7.5 7 5 Sri Lanka 30 3 30 3 Tanzania 15 0 15 0 Turkey 777.8 777 8 Uganda 20 0 20 0 Western Africa 9 4 9 4 Zambia 15 0 15 0 Total 1,800 2 431.1 2,231 3 Health, Nutrition, and Population Azerbaijan 5 0 5 0 Bangladesh 40 0 40 0 134 The World Bank Annual Report 2001 Sector Group/Country IBRD IDA Total Health, Nutrition, and Population (continued) Barbados 15 1 15 1 Bolivia 35 0 35 0 Cameroon 50 0 50 0 Dominican Republic 25.0 25 0 Eritrea 800 80 0 Ethiopia 59.7 59 7 Gambia, The 15 0 15 0 Ghana 25 0 25 0 India 300 300 Indonesia 63 2 40 0 103 2 Kenya 1000 100 0 Kyrgyz Republic 15 0 15 0 Mexico 350.0 350 0 Moldova 10 0 10 0 Rwanda 7 0 7 0 Samoa 5 0 5 0 Uganda 47 5 47 5 Venezuela, Repilblica Bolivariana de 30 3 30 3 Total 483 6" 564 2' 1,047 8" Mining Algeria 18 0 18 0 Mozambique 18 0 18.0 Total 18 0 18.0 36 0 Multisector Cambodia 35 0 35 0 Grenada 5.1 5 0 10 1 Macedonia, former Yugoslav Republic of 5 0 5 0 Total 51 450 501 Oil and Gas Georgia 9 6 9 6 Kenya 72 0 72 0 Total 81 6 81 6 Private Sector Development Bosnia and Herzegovina 19.8 19 8 Ethiopia 230 0 230 0 Guatemala 20 3 20 3 Lesotho 28.6 28 6 Nicaragua 5 0 5 0 Nigeria 114 3 114 3 Rwanda 40 8 40 8 Uganda 48 5 48 5 Total 20.3 487 0 507.3 Public Sector Management Algeria 23 7 23 7 Argentina 373.7 373.7 Armenia 614 614 Bangladesh 30 6 30 6 Bolivia 60 0 60 0 Brazil 766 5 766 5 Colombia 35 5 35 5 Croatia 5.0 5 0 Honduras 26 2 26 2 (continued next page) Projects Approved for IBRD and IDA Assistance in Fiscal 2001, by Purpose, July 1, 2000-June 30, 2001 135 Appendix 11 (continued) Sector Group/Country IBRD IDA Total Public Sector Management (continued) India 75.0 75 0 150 0 Jordan 120.0 120 0 Kenya 153.2 153 2 Mauritania 18 3 18 3 Mexico 505 1 505 1 Nicaragua 28 7 28 7 Niger 47.2 47 2 Sao Tome and Pnncipe 10 0 10 0 Sierra Leone 3.5 3 5 Sri Lanka 2 0 2.0 Uganda 150 0 150 0 Total 1,904.5 666 1 2,570 6 Social Protection Albania 10 0 10.0 Argentina 5 0 5 0 Belize 1 4 1 4 Bolivia 5 0 5 0 Bosnia and Herzegovina 38.5 38.5 Bulgaria 8 0 8 0 Cambodia 10 0 10 0 Colombia 150.0 150 0 Ethiopia 175 6 175 6 Honduras 60 0 60 0 Indonesia 208 9 159.5 368.4 Lebanon 20 0 20 0 Macedonia, former Yugoslav Repubhc of 2.5 2.5 Madagascar 128 1 128 1 Nicaragua 60 0 60 0 Nigena 60 0 60.0 Peru 100.0 100 0 Romania 50 0 50 0 Russian Federation 80.0 80 0 Senegal 30 0 30 0 Tanzania 60 0 60 0 Turkey 250 0 250 0 Total 873 3 799 2 1,672.5 Telecommunications Morocco 65 0 65 0 Total 65.0 65 0 Transportation Albania 8 1 8.1 Azerbaijan 40 0 40 0 Belize 13 0 13 0 Bosnia and Herzegovina 11 0 11 0 Cape Verde 5.0 5 0 Chad 67 0 67 0 China 500.0 500 0 Croatia 13.9 13 9 Honduras 66.5 66 5 Indca 1,330.0 1,330 0 Kyrgyz Republic 22.0 22 0 Lao People's Democratic Republic 25 0 25 0 Macedonia, former Yugoslav Republic of 9 3 9 3 Mexico 218.0 218 0 Mongolia 34 0 34 0 Nicaragua 75 0 75 0 136 The World Bank Annual Report 2001 Sector Group/Country IBRD IDA Total Transportation (continued) Pakistan 3 0 3 0 Peru 50.0 50 0 Philippines 60 0 60 0 Poland 139 5 139 5 Russian Federation 60.0 60 0 Tunisia 37 6 37 6 Vietnam 110.0 110 0 Yemen, Republic of 45.0 45 0 Zambia 27 0 27 0 Total 2,422 0 547 9 2,969 9 Urban Development Bangladesh 4.7 4 7 Burundi 40 0 40 0 China 205.5 205 5 Indonesia 11 7 5 8 17 4 Nicaragua 13 5 13 5 Russian Federation 85.0 85.0 Tunisia 17.0 17 0 Vietnam 166 3 166 3 Total 319 2 230 3 549 5 Water Supply and Sanitation Burkmna Faso 70.0 70 0 Comoros 11 4 11 4 Ecuador 32 0 32 0 India 65.5 65 5 Macedonia, former Yugoslav Republic of 16 2 13 1 29 3 Niger 48 0 48 0 Russian Federation 122 5 122 5 Senegal 125 0 125 0 Ukraine 24 3 24 3 Uruguay 6 0 6 0 Yemen, Republic of 20 0 20 0 Total 201 0 353 0 554 0 Bank-wide total 10,487 1 6,763 5 17,250 6 Note Supplements are included in the amount but are not counted as separate lending operations Joint IBRD/IDA operations are counted only once, as IBRD operations a Includes $287 2 million to seven countries under the Multi-Country HIV/AIDS Program for Africa (IDA) and $40 I million to two countries under the Caribbean HIV/AIDS Intiative (IBRD), for which the Bank earmarked funding of $500 million and $155 million, respectively, in fiscal 2001 Amounts may not add to totals because of rounding Projects Approved for IBRD and IDA Assistance in Fiscal 2001, by Purpose, July 1, 2000-June 30, 2001 137 Appendix 12: Development Committee Communiques, Fiscal 2001 1 The 62nd meeting of the Development and other international, national, and private part- Committee was held in Prague, Czech Republic, on ners, to combat communicable diseases, such as September 25, 2000, under its new Chairman, Mr HIV/AIDS, malaria, and tuberculosis. Ministers Yashwant Sinha, Finance Minister of India The noted the progress made since the April meeting of Committee expressed its great appreciation to Mr. the Committee, and were encouraged that the Tarrin Nimmanahaeminda, Minister of Finance of international consensus that AIDS and other wide- Thailand, for his valuable leadership and guidance spread diseases created severe development prob- to the Committee as its Chairman during the past lems was being turned into strengthened action two years Mr. James Wolfensohn, President of the They also welcomed the commitment of IDA World Bank, Mr. Horst Kohler, Managing Director donors to expand and make more flexible the con- of the International Monetary Fund, and Mr Carlos cessional resources available for these activities, Saito, Chairman of the Group of Twenty-four, without compromising fundamental IDA allocation addressed the plenary session Observers from a policies. They encouraged the Bank to press further number of international and regional organizations ahead on its commitment to help turn back the also attended global HIV/AIDS epidemic, and welcomed the recently approved $500 million IDA program for 2 The Ministers' discussions took place against the this purpose in Africa background of continuing public debate about the benefits and risks of globalization. Ministers stressed 5 Ministers noted the Bank's valuable role, in part- that the more integrated global economy and tech- nership with the Fund and other international agen- nological gains brought about by globalization cies, in strengthening international financial archi- should be a great source for economic and social tecture. This includes helping to develop appropri- progress, equity, and stability, but that these results ate standards and codes, taking account of the are not inevitable Ministers recognized their impor- developing country perspective, in areas that are tant responsibility to help ensure that globalization important to financial resilience and integration into works for the benefit of all, and not just the few, the global financial system, and assisting countries and re-emphasized their commitment to strength- to strengthen their related institutions and policies ening the Bank, the Fund, and other multilateral Ministers also pointed to the importance for all institutions as valuable allies in this effort whose nations of increased national and international ultimate objective is global poverty reduction, in efforts to combat cross-border financial abuse, such particular halving the proportion in extreme pover- as money laundering and other forms of abuse ty by the year 2015. They urged the Bank to expand its program of tech- nical and advisory support as a significant contribu- 3. Poverty Reduction and Global Public Goods. In tion to greater participation by developing countries considering the role the Bank might play in global in a more open and equitable world trading system. public goods in areas within its mandate, Ministers They reiterated both the promise and the challenge noted four key criteria for Bank involvement clear of communications technology to promote equi- value added to the Bank's development objectives; table growth, and welcomed initiatives by the Bank Bank action is needed to catalyze other resources to help provide greater access, in partnership with and partnerships, a significant comparative advan- others, for poor countries and communities to the tage for the Bank, and an emerging international knowledge and information opportunities of the consensus that global action is required. They digital age endorsed four areas for Bank involvement, in coop- eration with relevant international organizations 6 Ministers recognized the need to explore further facilitating international movement of goods, servic- opportunities for securing appropriate financing for es, and factors of production, fostering broad inclu- carefully selected priority global and regional pro- sion in the benefits of globalization and mitigating grams with substantial impact on poverty reduction. major economic and social problems, such as the This would require innovative use of World Bank transmission of disease and the consequences of lending and, in some cases, grant facilities, taking conflict; preserving and protecting the environment; into account alternative sources of such funds and and creating and sharing knowledge relevant to financial implications for the Bank, as well as of development new forms of collaboration with international, bilat- eral, philanthropic, and private partners They 4 Ministers warmly endorsed the greatly expanded stressed global public goods investments that bene- efforts being made by the Bank, the United Nations, fited all countries should attract new resources. 138 The World Bank Annual Report 2001 7 The Committee looked forward to receiving, at Strategy Papers Ministers welcomed the discussion its next meeting, a report on progress made in fur- of a poverty reduction support credit that would ther delineating priority global public goods invest- support poverty reduction strategies of governments ment areas for the Bank, as well as on division of and complement the Fund's poverty reduction and labor between development partners and the devel- growth facility They suggested that in its further opment of appropriate financing arrangements definition of the instrument, the Bank should also address the nature of the analytic work needed to 8 Bank Support for Country Development underpin it, such as public expenditure reviews and Recognizing that working with individual countries poverty and fiduciary assessments. They also remains the backbone of the Bank's business, requested the Bank and the Fund to review the Ministers welcomed this initial opportunity for a modalities for their cooperation in implementing broad review of the World Bank Group's role and both the Bank's support credit and the Fund's instruments in support of member countries' devel- growth facility. Ministers stressed the importance of opment, taking into account the role of the IMF effective Bank-Fund coordination given the signifi- and other institutions cant role the institutions play in support of poverty reduction in low-income countries 9. Ministers emphasized that the Bank must tailor its support to reflect widely differing country situa- 12. Ministers reaffirmed the very important contin- tions To help ensure that country programs are well uing role of the Bank Group in helping to reduce grounded, Ministers urged the Bank to continue to poverty in middle-income countries, home to so strengthen its country diagnostic and other econom- many of the world's poor They stressed that the ic and sector work. They stressed the need to focus Group's focus must be on providing support that on relevance to the country concerned, and on the private sector cannot or will not provide, and on opportunities for greater synergy with the work of fostering private sector-led economic growth. They the country and other development partners. welcomed the creation of a task force to address Ministers noted that this analytic work, along with how the Group can best respond to the evolving capacity building, took on added importance in development needs of this diverse group of light of the use of programmatic adjustment lending economies. Ministers agreed that the task force in support of borrowers' social and structural should consider, inter alia, the modalities of condi- reforms, and the vision for Bank and Fund roles and tionality and instruments to maximize the effective- partnership set out in the September 5, 2000, Joint ness of Bank assistance for countries at different Statement by the President and the Managing stages of development and reform; the scope and Director conditions for providing borrowers more financial support for social and structural programs at times 10 Ministers emphasized the urgent need for the of market dislocation; the coverage of economic and World Bank Group to clarify its agenda for institu- sector work; and the costs of doing business with tional selectivity (based in part on its upcoming the Bank, including the implications for pricing of review of sector strategy papers), to carefully man- Bank products Ministers looked forward to a age total demands made on Bank staff and other progress report at their next meeting resources, and to work closely and systematically with other multilateral development banks and 13. Heanly Indebted Poor Countries (HIPC) international organizations on a better coordination Initiative Ministers welcomed the progress achieved of responsibilities Ministers stressed that multilater- in implementing the Initiative and urged that all al and bilateral donors could contribute greatly to appropriate steps be taken to further strengthen the country ownership, more efficient use of resources, process They noted that the enhancements and achievement of the agreed-on International endorsed at their meeting last year are resulting in Development Goals, by making greater progress on "deeper, broader, and faster" debt relief to eligible the harmonization of their operational policies and countries undertaking the economic and social procedures to reduce the burden on developing reforms needed to reduce poverty They noted in countries. Ministers asked the Bank to work closely particular that, to date, 10 countries have reached with its partners and prepare a report for the their decision points under the enhanced frame- Committee's next meeting on progress with harmo- work, and work is being accelerated within that nization. framework to try to reach the goal of bringing 20 countries to this point by the end of the year This 11 Ministers welcomed the Bank's overall approach is expected to result in combined debt service relief for low-income countries and its proposals for (including original and enhanced HIPC assistance) achieving greater coherence among various program amounting to well over $30 billion. Taken together documents and instruments, including basing with traditional debt relief mechanisms, a total of Country Assistance Strategies on Poverty Reduction about $50 billion will be provided to these countnes (continued next page) Development Committee Communiques, Fiscal 2001 139 Appendix 12 (continued) 14. Ministers also welcomed the increased efforts to al capacity, but urged movement from Interim to improve implementation of the Initiative They Full Poverty Reduction Strategy Papers on a timely asked that the Bank and the Fund continue to work basis. While strongly reiterating the core principle of with other creditors and eligible countries to ensure country ownership, Ministers called on the Bank, that the modifications to the original HIPC frame- the Fund, and other agencies to provide appropriate work (reflected in the enhanced Initiative endorsed technical support for countries' strategy preparation a year ago), such as the provision of interim assis- efforts. tance beginning at the decision point and adoption of a floating completion point, provide the much- 17. Comprehensive Development Framework needed support to qualifying countries on a timely Ministers expressed support for the comprehensive basis Ministers expressed support for the strength- approach to development reflected in the frame- ened partnership between the two institutions in work and welcomed the progress being made, and implementing the Initiative, and for their commit- the lessons learned, in implementing it in pilot ment to move forward as expeditiously as possible. countries. They recognized that implementation is It was recognized, however, that the pace of imple- still at an early stage and many country-specific mentation would also be determined by country challenges remain, but noted that a wider applica- factors Ministers supported maintaining a flexible tion of the framework is already taking place in the approach with respect to track record requirements preparation of Poverty Reduction Strategy Papers They endorsed the extension of the "sunset clause" which are based on the framework's principles, par- until end-2002 to allow additional countries, partic- ticularly that of achieving strong country ownership ularly those emerging from conflict, to participate They looked forward to reports of further progress in the Initiative Ministers also reiterated that within in implementing the Comprehensive Development the existing HIPC framework the option exists, at Framework. the completion point, to reconsider the amount of debt relief for countries seriously affected by excep- 18. IBRD Financial Capacity. Ministers reviewed tional adverse shocks. the World Bank's updated report on this subject and confirmed that the Bank's finances remained 15. Ministers stressed the importance of fully sound. At the same time, Ministers recognized that financing the enhanced HIPC Initiative, without the Bank's financial capacity may, in the case of sig- compromising concessional facilities such as IDA. nificantly increased demand, limit its ability to They urged all donors to meet their commitments respond Ministers requested management and the of financial support, and welcomed the arrange- Executive Board to keep this subject under review, ments in place to accomplish this objective. While including the level of Bank reserves recognizing the special needs of particular develop- ing and low-income transition country creditors, 19. Bank-Fund Staff. Ministers took this opportunity Ministers also urged all creditors to participate in to express, on behalf of all member governments, the debt relief framework their appreciation to Fund and Bank staff for their continued hard work and high level of dedicated 16. Poverty Reduction Strategy Papers: Ministers service for the goals of the Bretton Woods reviewed progress with respect to the Poverty Institutions. Reduction Strategy approach, endorsed at their September 1999 meeting as a way to strengthen the 20. Note of Appreciation: Ministers expressed their link between poverty reduction, HIPC debt relief, deep gratitude for the warm hospitality and support and Bank and Fund concessional lending. They provided by the Czech authorities and the people noted the growing momentum in the adoption of of the Czech Republic. the approach and the positive response to it on the part of countries and development partners. 21 Next Meeting The Committee's next meeting is Ministers recognized the challenges that countries scheduled for April 30, 2001, in Washington, D.C. faced due, inter alia, to limited data and institution- 140 The World Bank Annual Report 2001 Communique ment This should serve as the starting point for the Bank Group Country Assistance Strategy (CAS), 1. The 63rd meeting of the Development backed by strong diagnostic and other economic Committee was held in Washington, D.C., on April and sector work. The Bank should systematize and 30, 2001 under the chairmanship of Mr. Yashwant strengthen its analysis of the country situation, Sinha, Minister of Finance of India. The Committee including through expanding, in concert with its also met on April 29, 2001 in joint session with the partners, support for local capacity building International Monetary and Financial Committee to Ministers noted the particular importance of stronger focus on strengthened cooperation to foster growth analysis on structural, social, and sectoral issues and and fight poverty in the world's poorest countries pnorities, as well as on public expenditure, procure- Mr James Wolfensohn, President of the World ment, and financial management systems Bank; Mr. Horst Kohler, Managing Director of the International Monetary Fund, and Mr. Joseph 0 4. Ministers noted the importance of a menu of Sanusi, Chairman of the Group of Twenty-four, lending instruments, reflecting borrowers' different addressed the plenary session Observers from a needs, objectives, and track records and Bank Group number of international and regional organizations comparative advantage They stressed that lending also attended. must be based on country commitment to poverty reduction The Committee reemphasized the con- 2 Strengthening the World Bank Group's Support for tinued importance of Bank investment lending, set Middle-Income Countries- Ministers broadly wel- within a sound CAS framework, as a powerful vehi- comed the proposals put forward by the Bank fol- cle for transferring knowledge, testing and demon- lowing the work of the World Bank Group Task strating new approaches, building government Force on Middle-Income Countries They noted capacity and supporting the provision of needed that combating poverty in this group of countries social services and infrastructure. Ministers wel- was essential for meeting the Inter-national comed the improving quality and developmental Development Goals, and reemphasized the Bank focus of adjustment lending They stressed that its Group's important role in supporting these coun- envisaged more systematic use must be matched by tries' growth and poverty reduction efforts. The commitment to policy and institutional reforms or a Committee noted that good policies, and the insti- proven track record. It must also be underpinned by tutions to implement them, were at the core of adequate country policies and fiduciary systems successful development programs, and welcomed and, where needed, action to strengthen them. In that an increasing number of countries were adopt- this regard they stressed the importance of strong ing this approach, that external resources were capacity for managing and accounting for public most effective when supporting such policies and expenditures They called for a more transparent institutions; and that even countries with access to and systematic approach to the monitoring and international financial markets may benefit from forecasting of the mix of overall IBRD lending-as Bank financial support since their access is often between investment and adjustment lending-to limited, volatile and restricted to short maturities complement the CAS process They also discussed Ministers recognized that such volatility can lead to the proposed deferred drawdown option and its disruptions and cause substantial adverse effects on potential value for a group of reforming countries, poverty levels. Ministers stressed that since in most which is likely to be small in number, and encour- cases the Bank Group's share of a country's overall aged the Bank to complete the work needed to external financing is small, its role must be selec- finalize the proposal for consideration by Executive tive and strategic-as a catalyst for policy and insti- Directors. tutional change, including capacity building as well as pro-poor policies, for stable and sustainable pri- 5 Ministers urged the Bank to translate its propos- vate investment flows, and for policy and financial als into specific actions for strengthening the support from development partners in promoting Group's analytic and financial support for middle- sustainable and equitable growth and poverty income countries They emphasized that the Bank reduction must be highly selective in what it does, drawing increasingly on analyses by other development part- 3 Following on their discussion of this topic at the ners and by the countries themselves, and looking Committee's previous meeting, Ministers reiterated to development partners to take the lead in sup- the need to tailor Bank Group support to the wide- porting reforms in particular sectors where they ly differing circumstances found among this diverse have a comparative advantage. They attached par- set of countries. The Committee stressed that to ticular importance to the Bank and Fund using ensure country ownership, this support must be these proposals as an element in enhanced coopera- grounded in the country's own vision of develop- tion at the country level (continued nexlt page) Development Committee Communiques, Fiscal 2001 141 Appendix 12 (continued) 6 Harmonization of Operational Policies and access global markets In this context, they wel- Procedures: Ministers stressed the importance of comed recent initiatives taken by a number of harmonizing operational policies and procedures by countries. The Committee broadly endorsed the the Bank, other MDBs, and bilateral aid donors, global, regional and national level work program set with the objective of enhancing development effec- forth in the Bank's paper prepared for this meeting, tiveness, increasing efficiency, and reducing adminis- including, most importantly, expanded activities at trative burdens and costs on recipient governments the country level which would increasingly be high- The Committee stressed the need to move more lighted in the Bank Country Assistance Strategies rapidly, while maintaining appropriate standards, to This would include support for countries to address harmonize aid management arrangements, in partic- trade issues in their PRSPs. The Committee agreed ular to help low-income countries implement their on the particular significance of focusing on "behind PRSPs. Ministers noted that harmonization in indi- the border" issues-such as investment regulations, vidual country programs provides a pragmatic obstacles to efficient transport of goods and materi- approach that can lead to early action, and encour- als, standards and technical regulations, telecommu- aged all development partners to rely increasingly nications, and business services-to ensure that on the borrower government's own planning and countries are able to take full advantage of the budgetary processes, helping to strengthen these opportunities presented by globalization In systems and processes where needed. Ministers response to the need to increase the capacity of the urged them to work with developing countries to poorest nations to participate more effectively in develop common good-practice approaches for pro- the international trading system, the Committee curement, financial management, and environmen- urged the Bank to work together with its partners tal assessments. They stressed that such approaches to achieve maximum benefits from the recently would provide a good basis for fostering capacity- strengthened Integrated Framework for Trade building by guiding action plans designed to help Related Assistance for the Least Developed countries address country prnonties. They encour- Countries. In this context the Committee wel- aged the World Bank and its partners-including comed efforts to untie aid, including the recent ad other MDBs and the OECD/DAC Working Group referendum decision by OECD donors to untie on Harmonization-to work together to develop an their aid to the Least Developed Countries overall framework (including time-bound action plans) to help guide and coordinate future work in 9. HIV/AIDS Ministers welcomed the rapid growth this area. The Committee looked forward to receiv- of global attention to HIV/AIDS in the year since ing a report from the Bank on progress against an the Committee had described the epidemic as a action plan of specific changes to its own proce- grave threat to development progress in many areas dures to facilitate harmonization. of the world, especially in Africa They noted with great concern, however, the still unchecked spread 7. Global Public Goods: The Committee welcomed of HIV/AIDS, the growing evidence of its devastat- the Bank's progress in supporting global public ing toll, and the continuing need for greater govern- goods in the areas endorsed by the Committee at its ment leadership Ministers urged that the new com- last meeting-i.e., communicable disease, trade inte- mitment reflected by many leaders of developing gration, financial stability, knowledge and environ- and developed countries be converted quickly into mental commons. The Committee welcomed the coordinated and focused international action for Bank's commitment to anchor its global public prevention, education and comprehensive care, goods activities in its core business and country including broader access to treatment. The work, to remain selective and focused in each of Committee urged that the epidemic be addressed these areas, to consolidate its cooperation and divi- on a multi-sector basis, including a focus on sion of labor with other intemational partners, and HIV/AIDS in development policies and assistance to carry out further analytical work with its devel- to governments in health and other sectors In par- opment partners on the financing arrangements and ticular, Ministers suggested that World Bank governance required for support of global public Country Assistance Strategies analyze the impact of goods, including cautiously exploring a possible role HIV/AIDS and indicate appropriate responses, for IDA grants. working with partners in the context of each coun- try's national HIV/AIDS strategy. The Committee 8 Leveraging Trade for Development-World Bank expressed its appreciation for the actions taken thus Role: Ministers reemphasized the critical impor- far by the Bank to implement the strategy that tance of trade for economic growth and poverty Ministers had reviewed a year ago, and encouraged reduction and the important role the Bank, in col- the Bank to work with its partners to continue laboration with its partners, can play in helping expanding efforts in all geographic regions. The developing countries to increase their ability to Committee also urged the Bank and the United 142 The World Bank Annual Report 2001 Nations to play an active role as a facilitator of the small economies. The Committee generally agreed improved links between the pharmaceutical indus- with the recognition of the FATF 40 recommenda- try and developing countries in support of AIDS- tions as the appropriate standard for combating related programs The Committee also recognized money laundering, and that work should go forward the need for a substantial increase in global to determine how the Recommendations could be resources for HIV/AIDS-related analysis, research adapted and made operational in the work of the and action programs; a portion of such increased Fund and the Bank In this regard, the Committee funding might be channeled through a possible new noted that, to be consistent with the ROSC process, multilateral trust fund for AIDS, malaria and TB. assessments should be undertaken on a uniform, The Committee also called on participants in the cooperative and voluntary basis The Committee June 2001 UN General Assembly Special Session urged closer collaboration by the Fund and the on HIV/AIDS to make concrete commitments that World Bank with the FATF and other anti-money would produce a rapid intensification of global laundering groups in reviewing standards and proce- action on HIV/AIDS. dures in this area Ministers also noted that the Bank and the Fund are already making valuable 10. International Financial Architecture: Ministers contributions through their ongoing programs to welcomed the continuing contributions of the Bank help countries strengthen their economic, financial and the Fund, in partnership with other groups, in and legal systems. They agreed that the primary strengthening the international financial architec- responsibility for actions against money-laundering ture and helping countries build the capacity rests with the countries themselves and with spe- required to participate in, and benefit from, the cialized institutions that have a mandate and global financial system The joint Bank-Fund expertise in this area The Committee observed that Financial Sector Assessment Program and Bank- the main focus of the Bank, consistent with its Fund collaboration on the Reports on Observance development mandate and comparative strengths, of Standards and Codes have established a valuable would be on enhanced support for capacity build- framework for helping countries strengthen their ing and to help countries identify and put in place financial and economic systems The Committee the policy and institutional foundations needed to welcomed the Bank-Fund Guidelines for Public reduce the risks of financial abuse Debt Management, which would help governments build capacity to manage their debt, thereby reduc- 12. Next Meeting: The Committee's next meeting is ing vulnerability to potential financial instability scheduled for October 1, 2001 in Washington, D C Ministers also welcomed the Principles and Ministers considered it might be timely at this Guidelines for Effective Insolvency and Creditor meeting to discuss issues arising in connection with Rights Systems and encouraged their further devel- the U.N. Financing for Development event scheduled opment based on close consultation with borrowing for early 2002, based m part on a continued countries, additional comments received, continuing exchange of views between their representatives at work with partner institutions, and experimentation the United Nations and the Bank and the Fund with country assessments Ministers also agreed to consider, at a future meeting, the subject of education, including implementation 11 Ministers agreed that money laundering is an of the Dakar commitments on Education for All. issue of global concern, affecting both large and Development Committee Communiques, Fiscal 2001 143 Editor Manorama Gotur, Office of the Vice President, Extemal Affairs, World Bank Assistant to the Editor Nisha Chatani, Office of the Vice President, External Affairs, World Bank Production Philip A Birkelbach, Central and Operational Accounting Division, World Bank Jinkyung Du, Central and Operational Accounting Division, World Bank Cindy A Fisher, Office of the Publisher, External Affairs, World Bank Susan Graham, Office of the Publisher, External Affairs, World Bank Brenda Mejia, Office of the Publisher, External Affairs, World Bank Robert O'Leary, Office of Vice President and Controller, World Bank Cover Design and Art Direction Patricia Hord, Patricia Hord Graphik Design Cover Photo UNICEF/HQ93-0076/Roger Lemoyne Typesening Patricia Hord Graphik Design Project Assistants Zero Akyol Robert Reese Editorial Consultant Alison Penia 145 The World Bank Mission To fight poverty with passion and professionQalismfor lasting results. To help people help themselves and their environment by providing resources, sharing knowledge, building capacity, andforging partnerships in the public and private sectors. To be an excellent institution able to attract, excite, and nurtuire diverse and comnmitted staff with exceptional skills who know how to listen and learn The World Bank 1818 H Street, NW Washington, DC 20433 1 4 9 7 2 USA Telephone: 202 477 1234 Facsimile: 202 477 6391 9 780821 349724 Internet: www.worldbank.org ISBN 0-8213-4972-4 E-mail: feedback@worldbank.org